w GETTING THE DEAL THROUGHGETTING
Anti-Corruption Regulation Anti-Corruption Regulation In 43 jurisdictions worldwide
Contributing editor Homer E Moyer Jr 2015
2015 Anti-Corruption Regulation 2015
Contributing editor Homer E Moyer Jr Miller & Chevalier Chartered
Publisher Law The information provided in this publication is Gideon Roberton general and may not apply in a specific situation. [email protected] Business Legal advice should always be sought before taking Research any legal action based on the information provided. Subscriptions This information is not intended to create, nor does Sophie Pallier Published by receipt of it constitute, a lawyer–client relationship. [email protected] Law Business Research Ltd The publishers and authors accept no responsibility 87 Lancaster Road for any acts or omissions contained herein. Although Business development managers London, W11 1QQ, UK the information provided is accurate as of February Alan Lee Tel: +44 20 3708 4199 2015, be advised that this is a developing area. [email protected] Fax: +44 20 7229 6910
Adam Sargent © Law Business Research Ltd 2015 Printed and distributed by [email protected] No photocopying: copyright licences do not apply. Encompass Print Solutions First published 2007 Tel: 0844 2480 112 Dan White Ninth edition [email protected] ISSN 2042-7972 CONTENTS
Global Overview 7 Greece 77 Homer E Moyer Jr Ilias G Anagnostopoulos and Jerina (Gerasimoula) Zapanti Miller & Chevalier Chartered Anagnostopoulos Criminal Law & Litigation
Anti-corruption: progress on enforcement 12 India 82 Monty Raphael QC Aditya Vikram Bhat and Richa Roy AZB & Partners Member of the board of trustees of Transparency International UK
Indonesia 90 Compliance management systems 14 Deny Sidharta and Winotia Ratna Daniel Lucien Bühr Soemadipradja & Taher Lalive
Ireland 95 The OECD Foreign Bribery Report 15 Bríd Munnelly, Carina Lawlor and Michael Byrne Nicola Bonucci and Leah Ambler Matheson OECD Israel 101 Algeria 16 Yuval Horn and Ohad Mamann Khaled Goussanem and Salima Aloui Horn & Co Law Offices Goussanem & Aloui Law Firm Italy 106 Argentina 20 Roberto Pisano Fernando Basch and Guillermo Jorge Studio Legale Pisano Governance Latam · Guillermo Jorge, Fernando Basch & Asociados Japan 112 Australia 26 Yoshihiro Kai Jane Ellis and Brigid Trevaskis Anderson Mo¯ri & Tomotsune Assertia Pty Ltd Kenya 117 Bermuda 33 Godwin Wangong’u and CG Mbugua Alex Potts and Chen Foley Mboya Wangong’u & Waiyaki Advocates Sedgwick Chudleigh Ltd Korea 122 Brazil 40 Kyungsun Kyle Choi and Liz Kyo-Hwa Chung Shin Jae Kim, Renata Muzzi Gomes de Almeida, Kim & Chang Juliana Sá de Miranda and Claudio Coelho de Souza Timm TozziniFreire Advogados Liechtenstein 127 Siegbert Lampert Cameroon 45 Lampert & Partner Attorneys at Law Ltd Philip Forsang Ndikum Ndikum Law Offices Malaysia 132 New Sin Yew and Joshua Tay H’ng Foong Canada 51 BON, Advocates Milos Barutciski Bennett Jones LLP New Zealand 136 Hayden Wilson Czech Republic 57 Kensington Swan Radan Kubr and Jan Varˇecha PRK Partners sro Attorneys at Law Nigeria 143 Babajide O Ogundipe and Chukwuma Ezediaro Denmark 63 Sofunde, Osakwe, Ogundipe & Belgore Claus Ryberg Hoffmann Plesner Law Firm Norway 146 Christian Bredtoft Guldmann Erling Grimstad Moalem Weitemeyer Bendtsen Law Firm BDO AS
Ecuador 68 Peru 151 Bruce Horowitz and Ernesto Velasco Sandra Orihuela Paz Horowitz Robalino Garcés Orihuela Abogados | Attorneys at Law
Germany 72 Philippines 157 Kai Hart-Hönig Francisco Ed Lim and Chrysilla Carissa P Bautista Dr Kai Hart-Hönig Rechtsanwälte Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW)
2 Getting the Deal Through – Anti-Corruption Regulation 2015 CONTENTS
Poland 162 Turkey 209 Jarosław Kruk and Aleksandra Matwiejko-Demusiak Gönenç Gürkaynak and Ç Olgu Kama Kruk and Partners Law Firm ELIG, Attorneys-at-Law
Portugal 167 Ukraine 215 Alexandra Mota Gomes and Dirce Rente Igor Gavrilov and Sergey Aleksandrov PLMJ – Sociedade de Advogados, RL Law Offices Alekseev, Boyarchukov and partners
Qatar 174 United Arab Emirates 219 Marie-Anne Roberty-Jabbour Charles Laubach Lalive in Qatar LLC Afridi & Angell
Russia 178 United Kingdom 225 Vasily Torkanovskiy Monty Raphael QC and Neil Swift Ivanyan & Partners Peters & Peters
Saudi Arabia 184 United States 239 Robert Thoms and Sultan Al-Hejailan Homer E Moyer Jr, James G Tillen, Marc Alain Bohn and The Law Firm of Salah Al-Hejailan in association with Amelia Hairston-Porter Freshfields Bruckhaus Deringer Miller & Chevalier Chartered
Singapore 184 Venezuela 246 Wilson Ang and Kayla Feld Carlos Domínguez-Hernández and Fernando Peláez-Pier Norton Rose Fulbright (Asia) LLP Hoet Peláez Castillo & Duque
Spain 194 Vietnam 250 Laura Martínez-Sanz and Jaime González Gugel Ngo Viet Hoa Oliva-Ayala Abogados Russin & Vecchi
Sweden 198 Appendix: Corruption Perceptions Index 255 Olof Rågmark and Sofia Bruno Transparency International Advokatfirman Delphi
Switzerland 204 Marc Henzelin and Daniel Lucien Bühr Lalive
www.gettingthedealthrough.com 3 PREFACE Preface
Anti-Corruption Regulation 2015 Ninth edition
Getting the Deal Through is delighted to publish the ninth edition of Anti-Corruption Regulation, which is available in print, as an e-book, via the GTDT iPad app, and online at www.gettingthedealthrough.com.
Getting the Deal Through provides international expert analysis in key areas of law, practice and regulation for corporate counsel, cross-border legal practitioners, and company directors and officers.
Throughout this edition, and following the unique Getting the Deal Through format, the same key questions are answered by leading practitioners in each of the 43 jurisdictions featured. Our coverage this year includes new chapters on the Czech Republic, Indonesia, Qatar and Vietnam.
Getting the Deal Through titles are published annually in print. Please ensure you are referring to the latest edition or to the online version at www.gettingthedealthrough. com.
Every effort has been made to cover all matters of concern to readers. However, specific legal advice should always be sought from experienced local advisers.
Getting the Deal Through gratefully acknowledges the efforts of all the contributors to this volume, who were chosen for their recognised expertise. We also extend special thanks to Homer E Moyer Jr of Miller & Chevalier Chartered, the contributing editor, for his continued assistance with this volume.
London February 2015
www.gettingthedealthrough.com 5 Miller & Chevalier Chartered GLOBAL OVERVIEW
Global Overview
Homer E Moyer Jr Miller & Chevalier Chartered
Corruption, including corruption of public officials, dates from early in allowed companies that admitted to having made illicit payments to human history and countries have long had laws to punish their own cor- escape prosecution on the condition that they implement compliance pro- rupt officials and those who pay them bribes. But national laws prohibiting grammes to prevent the payment of future bribes. Ultimately, more than a country’s own citizens and corporations from bribing public officials of 400 companies, many among the largest in the United States, admitted other nations are a new phenomenon, less than a generation old. Over the to having made a total of more than US$300 million in illicit payments course of perhaps the past 20 years, anti-corruption law has established to foreign government officials and political parties. Citing the destabilis- itself as an important, transnational legal speciality, one that has produced ing repercussions in foreign governments whose officials were implicated multiple international conventions and scores of national laws, as well as in bribery schemes – including Japan, Italy and the Netherlands – the US an emerging jurisprudence that has become a prominent reality in interna- Congress, in 1977, enacted the Foreign Corrupt Practices Act (FCPA), tional business and a well-publicised theme in the media. which prohibited US companies and individuals from bribing non-US gov- This volume undertakes to capture the growing anti-corruption juris- ernment officials to obtain or retain business and provided for both crimi- prudence that is developing around the globe. It does so first by summa- nal and civil penalties. rising national anti-corruption laws that have implemented and expanded In the first 15 years of the FCPA, during which the US law was unique the treaty obligations that more than 150 countries have now assumed. in prohibiting bribery of foreign officials, enforcement was steady but These conventions oblige their signatories to enact laws that prohibit pay- modest, averaging one or two cases a year. Although there were recur- ing bribes to foreign officials. Dozens of countries have already done so, as ring objections to the perceived impact that this unilateral law was having this volume confirms. These laws address both the paying and receiving of on the competitiveness of US companies, attempts to repeal or dilute the illicit payments – the supply and the demand sides of the official corruption FCPA were unsuccessful. Thereafter, beginning in the early to mid-1990s, equation – as well as mechanisms of international cooperation that have enforcement of the FCPA sharply escalated, and, at the same time, a num- never before existed. ber of international and multinational developments focused greater Second, this volume addresses national financial record-keeping public attention on the subject of official corruption and generated new requirements that are increasingly an aspect of foreign bribery laws and significant anti-corruption initiatives. because of their inclusion in anti-corruption conventions and treaties. These requirements are intended to prevent the use of accounting prac- Transparency International tices to generate funds for bribery or to disguise bribery on a company’s In hindsight, a different type of milestone occurred in Germany in 1993 books and records. Violations of record-keeping requirements can provide with the founding of Transparency International, a non-governmental a separate basis of liability for companies involved in foreign as well as organisation created to combat global corruption. With national chapters domestic bribery. and chapters-in-formation now in more than 100 countries, Transparency Finally, because the bribery of a foreign government official also impli- International promotes transparency in governmental activities and cates the domestic laws of the country of the corrupt official, this volume lobbies governments to enact anti-corruption reforms. Transparency summarises the better-established national laws that prohibit domestic International’s annual Corruption Perceptions Index (CPI), which it began bribery of public officials. Generally not a creation of international obli- publishing in 1995, has been uniquely effective in publicising and height- gations, these are the laws that apply to the demand side of the equation ening public awareness of those countries in which official corruption is and may also be brought to bear on payers of bribes who, although foreign perceived to be most rampant. Using assessment and opinion surveys, the nationals, may be subject to personal jurisdiction, apprehension and pros- CPI currently ranks 175 countries and territories by their perceived levels ecution under domestic bribery statutes. of corruption and publishes the results annually. In 2014, Denmark and The growth of anti-corruption law can be traced through a number of New Zealand, followed by Finland and Sweden, topped the index as the milestone events that have led to the current state of the law, which has countries seen to be the least corrupt in the world, while Somalia and North most recently been expanded by the entry into force in December 2005 of Korea, were perceived to be the most corrupt. the sweeping United Nations Convention against Corruption. Spurred on Transparency International has also developed and published the by a growing number of high-profile enforcement actions, investigative Bribe Payers Index (BPI), a similar index designed to evaluate the supply reporting and broad media coverage, ongoing scrutiny by non-govern- side of corruption and rank the 28 leading exporting countries according to mental organisations and the appearance of an expanding cottage industry the propensity of their companies to bribe foreign officials. In the 2011 BPI, of anti-corruption compliance programmes in multinational corporations, Dutch and Swiss firms were seen as the least likely to bribe, while Russian anti-corruption law and practice is rapidly coming of age. firms, followed closely by Chinese and Mexican firms, were seen as the worst offenders. The US ‘questionable payments’ disclosures and the FCPA Through these and other initiatives, Transparency International has The roots of today’s legal structure prohibiting bribery of foreign govern- become recognised as a strong and effective voice dedicated solely to com- ment officials can fairly be traced to the serendipitous discovery in the early bating corruption worldwide. 1970s of a widespread pattern of corrupt payments to foreign government officials by US companies. First dubbed merely ‘questionable’ payments The World Bank by regulators and corporations alike, these practices came to light in the Three years after the formation of Transparency International, the World wake of revelations that a large number of major US corporations had used Bank joined the battle to stem official corruption. In 1996, James D off-book accounts to make large payments to foreign officials to secure Wolfensohn, then president of the World Bank, announced at the annual business. Investigating these disclosures, the US Securities and Exchange meetings of the World Bank and the International Monetary Fund that Commission (SEC) established a voluntary disclosure programme that the international community had to deal with ‘the cancer of corruption’. www.gettingthedealthrough.com 7 GLOBAL OVERVIEW Miller & Chevalier Chartered
Since then, the World Bank has launched more than 600 programmes World Bank continues to face resistance from countries in which corrupt designed to curb corruption globally and within its own projects. These practices are found to have occurred. programmes, which have proved controversial and have encountered opposition from various World Bank member states, include debarring International anti-corruption conventions consultants and contractors that engage in corruption in connection with Watershed developments in the creation of global anti-corruption law World Bank-funded projects. Since 2001, the World Bank has sanctioned came with the adoption of a series of international anti-corruption conven- over 400 firms and individuals for fraud and corruption, and referrals from tions between 1996 and 2005. Although attention in the early 1990s was the Integrity Vice Presidency of findings of fraud or corruption to national focused on the Organisation for Economic Co-operation and Development authorities for prosecution have resulted in dozens of criminal convictions. (OECD), the Organisation of American States (OAS) was the first to reach In mid-2014, the World Bank announced that during the 2014 fiscal year agreement, followed by the OECD, the Council of Europe and the African (ending 30 June 2014) it debarred 67 firms and individuals for wrongdoing, Union. Most recent, and most ambitious, is the United Nations Convention including several high-profile negotiated resolution agreements in which against Corruption, adopted in 2003. The events unfolded as follows. companies acknowledged misconduct related to a number of World Bank- On 29 March 1996, OAS members initialled the Inter-American financed projects and cooperated with authorities from numerous coun- Convention against Corruption (IACAC) in Caracas. The IACAC entered tries to quickly address corruption identified during ongoing World Bank into force on 6 March 1997. Thirty-three of the 34 signatories have now investigations. The World Bank maintains a listing of firms and individuals ratified the IACAC. The IACAC requires each signatory country to enact it has debarred for fraud and corruption on its website and, in an effort to laws criminalising the bribery of government officials. It also provides for increase the transparency and accountability of its sanctions process, the extradition and asset seizure of offending parties. In addition to empha- World Bank recently began publishing the full text of sanction decisions sising heightened government ethics, improved financial disclosures and issued by its Sanctions Board. transparent bookkeeping, the IACAC facilitates international cooperation In July 2004 and August 2006, the World Bank instituted a series in evidence-gathering. of reforms that established a two-tier administrative sanctions process In 1997, 28 OECD member states and five non-member observ- that involves a first level of review by a chief suspension and debarment ers signed the Convention on Combating Bribery of Foreign Officials in officer (SDO) followed by a second level review by the World Bank Group’s International Business Transactions (OECD Anti-Bribery Convention), Sanctions Board in cases where the sanctions are contested. In August which was subsequently ratified by the requisite number of parties and 2006, the World Bank also established a voluntary disclosure programme entered into force on 15 February 1999. Forty-one countries in all, includ- (VDP) which allows firms and individuals who have engaged in miscon- ing seven countries not currently members of the OECD, have now signed duct – such as fraud, corruption, collusion or coercion – to avoid public and ratified the OECD Anti-Bribery Convention, most recently Latvia, debarment by disclosing all past misconduct, adopting a compliance pro- which ratified the country’s accession to the convention on 31 March 2014. gramme, retaining a compliance monitor and ceasing all corrupt practices. States that are parties to the OECD Anti-Bribery Convention are The VDP, which was two years in development under a pilot programme, bound to provide mutual legal assistance to one another in the investi- is administered by the World Bank’s Department of Institutional Integrity. gation and prosecution of offences within the scope of the OECD Anti- In June 2014, the World Bank’s Office of Suspension and Debarment (OSD) Bribery Convention. Moreover, such offences are made extraditable. published a report with case processing and other performance metrics Penalties for transnational bribery are to be commensurate with those for related to 224 sanctions imposed on firms and individuals in Bank-financed domestic bribery, and in the case of states that do not recognise corporate projects from 2007 through 30 June 2013. Per the OSD report, most of these criminal liability (eg, Japan), the OECD Anti-Bribery Convention requires sanctions resulted in debarments. such states to enact ‘proportionate and dissuasive non-criminal sanctions’. In April 2010, the World Bank and four other multilateral development In terms of monitoring implementation and enforcement, the OECD banks (MDBs) – the African Development Bank, the Asian Development has set the pace. The OECD Working Group on Bribery (Working Group) Bank, the European Bank for Reconstruction and Development and the monitors state parties’ enforcement efforts through a regular reporting and Inter-American Development Bank Group – each agreed to cross-debar any comment process. After each phase, Working Group examiners will issue firm debarred by one of the other MDBs for engaging in corruption or fraud a report and recommendations, which are forwarded to the government on an MDB-financed development project. Mutual enforcement is subject of each participating country and are posted on the OECD’s website. In to several criteria, including that the initial debarment is made public and phase I of the monitoring process, examiners assess whether a country’s the debarment decision is made within 10 years of the misconduct. The legislation adequately implements the OECD Anti-Bribery Convention. In agreement also provides for wider enforcement of cross-debarment pro- phase II, examiners evaluate whether a country is enforcing and applying cedures by welcoming other international financial institutions to join the this legislation. In phase III, examiners evaluate the progress a country has agreement after its entry into force. The World Bank Group Integrity Vice made in addressing weaknesses identified during phase II, the status of the Presidency recently reported that 582 entities had been cross-debarred country’s ongoing enforcement efforts, and any issues raised by changes through fiscal year 2014. in domestic legislation or institutional framework. Since nearly all signato- In October 2010, the World Bank announced the creation of the ries to the OECD Anti-Bribery Convention will have undergone these three International Corruption Hunters Alliance to connect anti-corruption phases of monitoring by mid-2015, the Working Group launched a public authorities from different countries and to aid in the tracking and resolv- consultation in November 2014 on the next phase of monitoring to occur. ing of complex corruption and fraud investigations that are cross-border Phase IV is expected to focus more closely on detection, enforcement, and in nature. In December 2014, the World Bank convened its third large- corporate liability, and will take a more tailored approach, focusing more scale gathering of the Alliance. According to the World Bank, the Alliance closely on the specific enforcement situation in each country. has succeeded in bringing together hundreds of senior enforcement and On 26 November 2009, the OECD Council issued its first resolution anti-corruption officials from more than 130 countries in an effort to inject on bribery since the adoption of the OECD Anti-Bribery Convention. momentum into global anti-corruption efforts. Entitled the ‘Recommendation of the Council for Further Combating Finally, the World Bank has significantly expanded its partnerships Bribery of Foreign Public Officials in International Business Transactions’, with national authorities and development organisations in recent years to the resolution urges member countries to continue to take meaningful increase the impact of World Bank investigations and increase the capac- steps to deter, prevent and combat the bribery of foreign public officials, ity of countries throughout the world to combat corruption. For example, not only on a national level, but on a multinational level, with rigorous and since 2010, the World Bank has entered into more than a dozen coop- systemic follow-up. Among other things, the resolution recommends that eration agreements with authorities such as the UK Serious Fraud Office member countries ‘encourage companies to prohibit or discourage the use (SFO), the European Anti-Fraud Office, the International Criminal Court, of small facilitation payments’, and to always require accurate accounting the United States Agency for International Development, the Australian of any such payments in the companies’ books and records. The resolution Agency for International Development, the Nordic Development Fund, was supplemented by two annexes setting forth ‘Good Practice Guidance’, the Ministry of Security and Justice of the Netherlands, the Liberian Anti- one for member countries and one for companies. Corruption Commission and the Ombudsman of the Philippines. On 4 November 1998, following a series of measures taken since 1996, In the coming years, the World Bank’s prestige and leverage prom- the member states of the Council of Europe and eight observer states, ise to be significant forces in combating official corruption, although the including the United States, approved the text of a new multilateral con- vention – the Criminal Law Convention on Corruption. A year later, the
8 Getting the Deal Through – Anti-Corruption Regulation 2015 Miller & Chevalier Chartered GLOBAL OVERVIEW parties adopted the Civil Law Convention on Corruption. Forty-five coun- Equatorial Guinea and Brazil, from 2007 to 2011. The company’s internal tries have ratified the Criminal Convention, which entered into force on investigation into the matter found that certain of the company’s agents 1 July 2002, while 34 countries have ratified the Civil Convention, which had provided local government officials with significant ‘items of value’, entered into force on 1 November 2003. including re-routed commission payments, travel, education costs, cars, The Criminal Convention covers a broad range of offences including and a building. In the opinion of the Openbaar Ministerie, these payments domestic and foreign bribery, trading in influence, money laundering and were made with the knowledge of company employees. As part of the set- accounting offences. Notably, the Criminal Convention also addresses tlement, and in recognition of the company’s voluntary disclosure, coop- private bribery. The Criminal Convention sets forth cooperation meas- eration and remediation, the company will not face criminal prosecution ures and provisions regarding the recovery of assets. Similar to the OECD in the Netherlands. The company also announced that the US Department Anti-Bribery Convention, the Criminal Convention establishes a monitor- of Justice (DoJ), which had been conducting its own investigation into the ing mechanism, the Group of States against Corruption, to conduct mutual allegations, informed the company it had decided to close its inquiry with- evaluations. out bringing an enforcement action. The Civil Convention provides for compensation for damage that results from acts of public and private corruption. Other measures include Greece civil law remedies for injured persons, invalidity of corrupt contracts and In August 2012, a large German engineering firm agreed to pay the Greek whistleblower protection. Compliance with the Civil Convention is also Ministry of Finance €330 million to resolve longstanding bribery allega- subject to peer review. tions involving the firm’s Greek subsidiary. According to Greek authorities, The African Union Convention on Preventing and Combating the subsidiary paid millions of euros in bribes from 1997 to 2002 to win Corruption was adopted on 11 July 2003. To date, 35 of the 48 signatories contracts with Greece’s state-owned telecommunications company. Under have ratified the African Union Convention. The convention covers a wide the terms of the settlement, the engineering firm will reportedly satisfy range of offences including bribery (domestic and foreign), diversion of its monetary penalty through a combination of writing off debt the firm property by public officials, trading in influence, illicit enrichment, money is owed by the Greek government, investing in the local Greek economy laundering and concealment of property. The convention also guarantees and covering the Greek government’s legal costs. The Greek government access to information and the participation of civil society and the media in will also reportedly appoint a committee to oversee the engineering firm’s monitoring it. Other articles seek to ban the use of funds acquired through compliance programme. Over the past few years, the engineering firm has illicit and corrupt practices to finance political parties and require state settled related bribery charges with a number of other countries, including parties to adopt legislative measures to facilitate the repatriation of the the United States and Germany. proceeds of corruption. In February 2013, Greek prosecutors announced criminal charges Most aggressive, and potentially most important, of all of the interna- against five executives of the orthopaedic medical device subsidiary (ortho- tional conventions is the United Nations Convention against Corruption. paedic subsidiary) of a global US health-care company. The executives are One hundred and forty countries have signed this convention, which was accused of paying €16 million in bribes to doctors at government-owned adopted by the United Nations General Assembly on 31 October 2003. The hospitals in Greece. The alleged bribes were reportedly paid between convention entered into force on 14 December 2005 and 173 countries are 1998 and 2006 to secure the assistance of these doctors in promoting the now party to it, though not all are signatories. company’s products. In addition to charging these executives, Greek pros- The United Nations Convention against Corruption addresses seven ecutors have also formally accused eight government-employed doctors principal topics: mandatory and permissive preventive measures applica- – mostly orthopaedic specialists – of taking bribes and money laundering ble to both the public and private sectors, including accounting standards in connection with the same allegations. The charges by Greek authorities for private companies; mandatory and permissive criminalisation obliga- come approximately two years after the orthopaedic subsidiary and its US tions, including obligations with respect to public and private sector brib- parent resolved related charges in parallel actions brought by enforcement ery, trading in influence and illicit enrichment; private rights of action authorities in the UK and the US, respectively. for the victims of corrupt practices; anti-money laundering measures; cooperation in the investigation and prosecution of cases, including col- Canada lection actions, through mutual legal assistance and extradition; and asset In recent years, the Canadian government has increased its efforts to recovery. investigate and prosecute violations of the country’s Corruption of Foreign Public Officials Act (CFPOA) and has enhanced and strengthened the act’s Enforcement enforcement provisions. Public dispositions of anti-corruption enforcement actions, media reports In June 2011, Canadian authorities brought their first sizeable case of official and internal investigations, disclosures in corporate filings under the CFPOA, a C$9.5 million anti-bribery enforcement action against with securities regulatory agencies and stock exchanges, private litiga- a publicly held Canadian oil and gas exploration company. Canadian pros- tion between companies and former employees, monitoring reports by ecutors followed up on this enforcement action in January 2013, when international organisations, voluntary corporate disclosures, occasional they secured a guilty plea from a privately held, Calgary-based oil and confessions or exposés of implicated individuals, public statements by gas exploration company in connection with efforts to improperly secure enforcement officials, statistics compiled by NGOs and international exclusive contracts to explore and develop oil and gas reserves in southern organisations, findings of anti-corruption commissions, World Bank reports Chad. Among other things, the Calgary company acknowledged provid- and academic studies all provide windows into the fast-changing landscape ing direct and indirect benefits to the wife of the Chadian ambassador in of enforcement of anti-corruption laws and conventions. Although public an attempt to induce the ambassador to use his position to influence the knowledge of official investigations and enforcement activity often lags award of these contracts. After initially contemplating an agreement with behind, sometimes by years, the available indicators suggest ever-increas- a consulting company owned by the Chadian ambassador, the Calgary ing enforcement activity. Without going beyond the public domain, a few company instead entered into a C$2 million agreement with a consult- recent examples indicate the breadth and diversity of anti-corruption ing company owned by the ambassador’s wife. The Calgary company also enforcement, including international cooperation, extra-territorial and allowed the ambassador’s wife and the wife of another diplomat to pur- parallel enforcement, the use of liberalised bank secrecy laws and a grow- chase ‘founders’ shares’ in the company. In mid-2011, during due diligence ing array of penalties and sanctions. conducted in anticipation of a planned IPO, the Calgary company’s new management team uncovered the scheme, initiated an internal investi- Netherlands gation, and made a voluntary disclosure to Canadian and US authorities. In November 2014, a Dutch oilfield services provider entered into an As part of its settlement with Canadian authorities, the Calgary company out-of-court settlement with the Openbaar Ministerie, the Dutch Public agreed to pay C$10.35 million in penalties. Canadian prosecutors are still Prosecutor’s Service. Under the terms of the settlement, the company trying to recoup the proceeds of the bribery scheme from the ambassador’s agreed to pay a fine of US$40 million along with US$200 million in dis- wife, whose shares in the Calgary company may end up being worth over gorgement, for a total monetary assessment of US$240 million. According C$30 million. to the Openbaar Ministerie, the company voluntarily disclosed tens of mil- In June 2013, Canada amended the CFPOA to include a new books- lion dollars in potentially suspect commission payments that it had made to and-records offence, enhance the jurisdictional scope over and stiffen pen- foreign sales agents for services in a range of countries, including Angola, alties for foreign bribery, eliminate the previous exception for facilitation www.gettingthedealthrough.com 9 GLOBAL OVERVIEW Miller & Chevalier Chartered payments and the words ‘for profit’ from the definition of business, and Practice issued by the SFO and CPS, these agencies intend to use DPAs as centralise the authority to investigate the corruption of Canadian and for- ‘an alternative to prosecution’ and see the agreements as ‘a discretionary eign officials with the Royal Canadian Mounted Police. tool… to provide a way of responding to alleged criminal conduct’. DPAs In August 2013, Canadian authorities convicted the first individual will not be offered in every prosecution. Instead, the draft code of practice under the CFPOA for attempting to bribe officials associated with India’s outlines when the SFO and CPS will offer to negotiate a DPA and how such state-owned airline, Air India, in an effort to secure a contract for an negotiations will proceed. Ottawa-based technology company to provide facial recognition software and other related security systems. The defendant, an agent for the tech- United States nology company, made arrangements to provide two bribes to Air India In 2014, the DoJ and the SEC resolved 32 FCPA-related enforcement dispo- officials totalling C$450,000, both of which ultimately failed to secure the sitions. These cases involved both US and non-US individuals and corpo- desired contract for the technology company. In May 2014, a Canadian rations and imposed a range of civil and criminal penalties, including fines court sentenced the defendant to three years in prison, making him the first into the hundreds of millions of dollars. Corporate defendants resolved individual sentenced to jail under the CFPOA. This conviction comes in the these cases by entering into deferred prosecution agreements, non- midst of the prominent, ongoing prosecution of multiple executives and prosecution agreements and plea agreements. In some instances, a condi- third party representatives from a Montreal-based engineering firm that is tion of settlement has been that the company retain and pay for an ‘inde- under investigation by Canadian authorities for allegedly bribing govern- pendent compliance monitor’, who is given broad authority under these ment officials in over 10 African and Asian countries in connection with agreements. In other instances, the company has been required to ‘self- large-scale international construction projects. Authorities from at least six report’ at periodic intervals on the status of its remediation and compli- other countries are reportedly investigating the engineering company for ance efforts. And, in a recent development, the US enforcement agencies the same underlying conduct, and in 2013, the World Bank debarred the on several occasions have imposed a hybrid of the two, requiring compa- company and 100 of its affiliates from working on World Bank-funded pro- nies to retain and pay for an ‘independent compliance monitor’ during the jects for 10 years owing to alleged misconduct in Bangladesh, Cambodia first half of their probationary period and ‘self-report’ at periodic intervals and elsewhere. during the second half. At a recent FCPA conference, a high-ranking US enforcement official also revealed that more than 150 additional corpora- United Kingdom tions and individuals are currently under active investigation. On 1 July 2011, the UK Bribery Act 2010 (Bribery Act) entered into force While still high by historical standards, overall enforcement levels in after years of debate. The legislation banned both the payment and receipt the United States have fallen in recent years after reaching record heights of an ‘advantage’ provided to induce a person to improperly perform a in 2010. Despite this downward trend, however, the level of enforcement function or activity or reward a person for such an improper performance, activity against individuals (as opposed to corporations) saw an uptick in regardless of whether it is a public function or a private business activity. 2013, with the DoJ filing FCPA-related charges against 15 individuals in Since the Bribery Act applies only to conduct occurring after its imple- 2013 compared with only six in 2012. This is indicative of the agencies’ mentation, few prosecutions have been brought under the statute to date. continued emphasis on the prosecution of individuals and may explain, There are indications, however, that broader use of the Bribery Act may be in part, why overall enforcement has declined, since individuals are much on the horizon. In December 2014, the UK’s SFO secured the conviction more likely to demand trials that divert the agencies’ limited resources. of two British nationals for, among other things, improperly providing or Also likely to be contributing to the drop in enforcement are the accepting ‘a financial or other advantage’ in violation of the Bribery Act. resources the DoJ and SEC diverted into the drafting of new written guid- While other UK agencies have previously brought cases under the Bribery ance designed to provide additional clarity on the FCPA’s key elements and Act, this represents the first successful criminal prosecution by the SFO, the agencies’ enforcement priorities. Following a recommendation of the which is the UK enforcement body charged with investigating high-value OECD that the United States consider issuing consolidated public guid- and more complex cases of bribery and corruption. The charges in this ance on the FCPA and calls from the US Chamber of Commerce and other matter stemmed from an alleged £23 million fraud in 2011 and 2012 related stakeholder groups for statutory amendments to the Act, the enforcement to the sale of biofuel investment products to be grown on land purchased agencies issued a 120-page ‘Resource Guide on the US Foreign Corrupt in Cambodia. The defendants were connected to a UK biofuel investment Practices Act’ (the Guide) in November 2012. The Guide addresses each company that has since been placed in administration (a procedure similar element of the statute in depth and contains narrative discussions of key to bankruptcy) and included the company’s former director and chief com- issues, hypotheticals, case summaries, ‘anonymised’ examples of declina- mercial officer and a third-party sales agent. Following their convictions, tions, examples of violations, enforcement principles, over 400 footnotes, these men were sentenced to prison terms of 13 years and six years, respec- and ‘practical tips’ for reducing risk or complying with the law. While the tively. The company’s CEO and chairman was also convicted in connec- Guide makes no sharp departures from current practice, it does confirm tion with this matter, but on non-Bribery Act-related counts. In addition some previously unwritten enforcement policies and practices and explic- to these individual convictions, press outlets have written extensively on itly clarifies the government’s view of provisions that may appear ambigu- several high-profile corporate investigations related to the Bribery Act that ous to companies new to the statute and counsel who do not regularly are reportedly underway involving multi-national companies in the phar- practise in the area. maceutical, construction, oil and aerospace industries. Finally, although the pace of FCPA enforcement has slowed to around To prosecute corporations and individuals implicated in foreign brib- 30 enforcement actions a year, the size and scope of these settlements ery schemes that predate the Bribery Act, the SFO has continued to use is increasing, with the average combined settlement exceeding US$156 a patchwork of civil and criminal corruption laws the UK has long had in million in 2014, US$67.5 million more than in any prior year. For exam- place. For example, in December 2014, the SEC secured a jury convic- ple, in December 2014, the DoJ entered into a settlement with a French tion of a UK-based security and financial printing company and two of its power and transportation company, which agreed to pay a record-setting executives on charges that they corruptly agreed to make payments total- US$772 million criminal penalty to resolve allegations related to a dec- ling nearly £400,000 to officials in Kenya and Mauritania in an effort to ades-long bribery scheme the company operated in multiple countries secure contracts for the company in those countries. The defendants alleg- throughout the world. As part of the settlement, the French parent and its edly engaged in the misconduct from November 2006 to December 2010, Swiss subsidiary each pleaded guilty to FCPA-related charges, while the shortly after the SFO initiated its investigation. In announcing the verdict, company’s two US subsidiaries entered into deferred prosecution agree- the SFO thanked authorities in Kenya, Ghana and Switzerland for their ments. According to the settlement documents, executives and employees assistance in the prosecution. of the parent and its subsidiaries paid more than US$75 million in bribes to In April 2013, the UK enacted the Crime and Courts Act 2013, which government officials as a means to securing approximately US$4 billion in permits the SFO and the Crown Prosecution Service (CPS) to enter into power, grid and transportation projects for state-owned entities in a range deferred prosecution agreements (DPAs) with cooperating corporate of countries, including in Indonesia, Egypt, Saudi Arabia, the Bahamas and defendants to settle prosecutions for fraud, bribery and economic crimes. Taiwan. The company allegedly attempted to conceal the bribery scheme, While UK law already permitted DPAs in the prosecution of individuals, which netted some US$300 million in profit, by channelling payments the adoption of corporate DPAs mirrors a common approach by the US through third parties, including consultants purportedly engaged to pro- government for prosecuting corporate misconduct in the anti-corruption vide legitimate services. The settlement documents cite a host of factors area. According to a draft Deferred Prosecution Agreement Code of considered by the DoJ in reaching the appropriate resolution, including the
10 Getting the Deal Through – Anti-Corruption Regulation 2015 Miller & Chevalier Chartered GLOBAL OVERVIEW breadth of the misconduct, the failure to voluntarily disclose, the initial own efforts and that standard continues to rise. Spurred by government pro- refusal to fully cooperate with the investigation, and the lack of an effective nouncements, regulatory requirements, voluntary corporate codes and the compliance and ethics programme. To date, the DoJ has also charged four advice of experts as to what mechanisms best achieve their intended pur- executives from the company with FCPA-related violations in connection poses, anti-corruption compliance programmes have become common, with their roles in the scheme, three of whom have since pleaded guilty. In and often sophisticated, in companies doing business around the world. As announcing the settlement, the DoJ thanked authorities from nine other a result, anti-corruption codes and guidelines, due diligence investigations countries for their ‘significant cooperation’, many of which are reportedly of consultants and business partners or merger targets, contractual pen- conducting their own investigations into the misconduct. alties, extensive training, internal investigations, compliance audits and This small sample of the diverse array of investigations and prosecu- discipline for transgressions have become familiar elements of corporate tions under way or pending reflects a pronounced shift in anti-corruption compliance programmes. The OECD’s recent ‘Good Practice Guidance on law and a dramatic escalation of enforcement activity compared with only Internal Controls, Ethics and Compliance’, issued on 18 February 2010, is a decade ago. directed squarely at companies, business organisations and professional As yet untested is the provision in article 35 of the United Nations associations, and identifies a number of recognised elements of effective Convention against Corruption, which creates a private right of action compliance programmes: for entities or persons who have suffered damage as a result of bribery of • a strong commitment from senior management; public officials or other acts of corruption covered by the United Nations • a clearly articulated anti-bribery policy; Convention against Corruption. The United States provides no private • accountability and oversight; right of action consistent with article 35, as it maintained a reservation • specific measures applicable to subsidiaries that are directed at the against this requirement when ratifying the UN Convention. However, a areas of highest risk; private right of action can be available within the United States through • internal controls; other means. For instance, US law allows those injured in certain cir- • documented training; cumstances to bring a cause of action and seek compensation under the • appropriate disciplinary procedures; and Racketeer Influenced and Corrupt Organizations Act or as part of a civil • modes for providing guidance and reporting violations. securities suit; recent examples of such litigation include actions against Wal-Mart Stores Inc, Avon Products Inc, Orthofix International, and This guidance is noteworthy both because it is one of the first treaty-based Archer Daniels Midland Co, all of which were filed in recent years, based in articulations of effective anti-bribery compliance standards and because, part on alleged FCPA violations. on close reading, it emphasises some elements that have received less attention in traditional compliance programmes. Anti-corruption compliance programmes Against this backdrop, the expert summaries of countries’ anti-cor- The rapid changes in legal structures and enforcement have, in turn, con- ruption laws and enforcement policies that this volume comprises are tributed to a new corporate phenomenon and legal discipline – the wide- becoming an essential resource. It is within this legal framework that the spread institution of anti-corruption compliance programmes within implementation of anti-corruption conventions and the investigations and multinational corporations. Programmes that would have been innovative enforcement actions against those suspected of violations will play out. and exceptional in the early 1990s are becoming de rigueur. ‘Best practices’ Our thanks to those firms that have contributed to this volume for their have become a standard by which many companies seek to measure their timely summaries and for the valuable insights they provide.
www.gettingthedealthrough.com 11 PROGRESS ON ENFORCEMENT Transparency International UK
Anti-corruption: progress on enforcement
Monty Raphael QC Member of the board of trustees of Transparency International UK
‘If corruption were an industry, it would be the world’s third largest, is built and sustained. We anticipate campaigns to raise awareness in both worth more than $3 trillion and 5 per cent of global GDP.’ the public and private sectors. This will necessitate increased transpar- (B20 Policy Recommendations to the G20) ency, the raison d’être for the creation of Transparency International. The government has arranged to put in place a range of new measures in courts, This chilling statement dramatically illustrates the enormity of the chal- prisons and the financial sector. It should be noted that the first conviction lenge facing everyone working to reduce the incidence of corruption. All under the Bribery Act was of a court official. As TI has previously flagged, agree that corruption: the prison service has been identified as an area that needs greater anti- • increases the cost of doing business; corruption protection. As for the financial sector, it has been heavily criti- • decreases cross-border investment and trade facilitation; cised in the recent past for having inadequate controls to combat the pro- • generates waste and inefficiency in the use of public resources ; ceeds of corruption in the banking sector, and for the ability of politically • excludes the poor from public services and perpetuates poverty; and exposed persons and their associates who acquire valuable assets in the UK • corrodes public trust, undermines the rule of law and delegitimises the with doubtfully acquired wealth. state. Increasing protection against corruption It may all be summed up as a global integrity deficit present in both devel- Here the emphasis is placed on working with overseas partners to reduce oped and emerging economies (for examples of both see Transparency the impact of international bribery and corruption on the UK and UK busi- Inernational (TI)’s Corruption Perception Index 2014). nesses. This is coupled with greater protection for whistle-blowers. This Businesses and their advisers, at whom this annual guide is aimed, and form of evidence gathering is an inevitable consequence of the realisation particularly those entering new markets, are confronted with both regula- that corruption takes too long to discover and its harm is already wrought tory and compliance risk. A risk of growing complexity and one changing unless law enforcement can move quickly to identify the misconduct and evolving at a bewildering pace. While the goal remains that busi- while it is still in progress or freshly committed. The UK appears to have ness should be encouraged to eradicate corruption by adopting a culture accepted, however, that it will not follow the US example by offering fat of complete integrity, the supply-side emphasis is widely acknowledged monetary rewards to whistle-blowers. to be inadequate. Business wishes to be free of competitive pressures by The UK plan sets out a timetable of actions numbering 66 in all. My exhorting governments to reduce the demand for corruption, penalising colleagues at TI:UK, I believe, will publish a detailed comment on the plan, corruption by office holders and building a culture of social integrity. The and this brief introduction does not lend itself to such a detailed critique. past year has seen increased activity on the part of pressure groups such as However, looking at what has emerged in the past year, the following the B20 group of business leaders and NGOs such as TI with its ‘no impu- preliminary points may be made: nity’ policy. Both want to see existing laws used to punish briber and bribee • The UK’s National Crime Agency (NCA) will assume an intelligence- alike, and, where these laws are inadequate, the complete adoption of the gathering role in the area of bribery and corruption, as well as estab- norms enshrined in the UNCAC and OECD Convention. If anti-corruption lishing a centre for the recruitment of specialist support staff. It is of were an unclimbed Himalayan peak, then we could say that in 2014 new interest to note that over the past year or two there has been growing teams of mountaineers have left base camp, but only time will tell whether speculation that the NCA might take over all the functions of the SFO any of them manage to reach the summit. in this particular area or possibly completely consume it. This specula- Published in December 2014, the cross-government UK Anti- tion has only been put to rest for the time being so that the lead role of Corruption Plan brings together for the first time all of the UK’s activity investigating and prosecuting corruption in the future is still in doubt. against corruption in one document. The plan recognises the harm corrup- • The origins of this speculation is said to be the Home Office which, tion inflicts on society by undermining economic development and how in the Action Plan, acquires various new roles in the pursuance and it threatens democracy. At the moment when democracy has been threat- prevention of corruption. In addition, the Home Office will establish ened by barbaric acts of terrorism it is both relevant and poignant to real- a new offence of police corruption and create specific protections for ise that corruption too can lead to loss of life and the degradation of social those who blow the whistle on this misconduct. existence. The challenge to the UK and all developed states is how to apply • There will be new measures to prevent the corruption of jurors. finite resources to combatting major social evils. • There will be initiatives relating to the conduct of MPs, a subject Significantly, the plan recognises that corruption is a factor that currently outside the Bribery Act. threatens national security. • There will be efforts to counter corruption in local government and in The government’s strategic response to corruption has a number of public life by organised crime and others. key components including: • The Ministry of Defence will respond to TI:UK’s recommendations for addressing corruption in the defence industry. It should be noted that Prosecuting and disrupting people engaged in corruption one of the big success stories of TI:UK has been the establishment of Here, 2015 will perhaps evidence the government’s resolve to pursue those its defence and security programme and the work that it does with bad actors through the penal system, but with great rigour. both industry and law enforcement. • Perhaps with the FIFA scandal in mind, the Department for Preventing people from engaging in corruption International Development, responsible for sport, will outline meas- Here the aim must be to move on from simply devising and incorporat- ures to counter corruption in this area both in the UK and overseas. ing compliance programmes to create a business and social climate where Perhaps connected to the above there will be implementation of corruption at all levels is regarded with zero tolerance and where integrity
12 Getting the Deal Through – Anti-Corruption Regulation 2015 Transparency International UK PROGRESS ON ENFORCEMENT
the Sports Betting Action Plan which recognises that the enormous • Another controversial proposal is that the test for securing a restraint worldwide sports betting industry has produced a number of cases of (freezing) order under the Proceeds of Crime Act 2002 should no player corruption in the UK. longer be one of ‘reasonable grounds to believe’ but one merely of • Of some considerable interest is the proposal that the UK’s Ministry ‘suspicion’ in both domestic and international cases. of Justice will examine the case for a new offence of corporate failure • Please see the UK chapter of this review for details on the steps being to prevent economic crime, and the rules for establishing corporate taken to introduce legislation to create a central register of benefi- criminal conduct more widely. This idea has its genesis in section 7 cial ownership of UK companies. Coupled with this is the proposal to of the Bribery Act 2010, introducing as it did an offence of corporate abolish bearer shares. failure to take adequate measures to prevent bribery for their benefit. When considering many of the statements in the Action Plan it must This places a so-called reverse burden on business to demonstrate, as be borne in mind that in May 2015 the UK goes to the polls and imple- a defence, that measures were in place and that they were adequate. mentation of many of the proposals will be heavily dependent on the The Act does not define adequate. This is certain to cause controversy, outcome. so far there have been no prosecutions for a section 7 offence and its • Interestingly, because it illustrates the breadth of the problem of extension across the whole area of economic crime would doubtless enforcing international corruption standards, the UK will central- provoke strong resistance from business. Many will see this as a quick- ise its engagement with the G7, G20, OECD, GRECO (Council of fix response to the failure of successive governments to improve the Europe), FATF and the UN working groups henceforth to demon- prosecution of corporations without resorting to the US model of strate the government’s commitment. The Cabinet Office, the driver vicarious liability. behind the action plan, will coordinate the responses to the peer • We herald the introduction from October 2014 of new and stiffer reviews conducted by the OECD (Bribery Working Group), GRECO sentencing guidelines for offences of fraud, bribery and money laun- and the UNCAC. dering (see UK chapter). • Again the government’s resolve is shown by the intention to create a • The UK government department for international development will unit in the Cabinet Office to support the government’s Anti-Corruption consider developing a Rapid Response Team to deploy to countries Champion, one of the authors of the Action Plan. where regime change has taken place, to provide assistance to the new regime on mutual legal assistance and asset recovery, this is not a If Her Majesty’s government or its successor is in real earnest, even though proposal without difficulties, where the new regime itself has inherited tempered by the squeeze on its resources, 2015 will be an important year a weak rule of law system and may still harbour bad actors, whether or in the UK for all those, like TI, who believe that tackling corruption is one not connected to the ousted regime. of the most important initiatives in developing and observing a free and • Many will welcome the ongoing assessment of the AML regime and fair society. particularly the Suspicious Activity Reports arrangements when it has been revealed that the vast majority of such reports go unread and unconsidered.
www.gettingthedealthrough.com 13 COMPLIANCE MANAGEMENT SYSTEMS Lalive
Compliance management systems
Daniel Lucien Bühr Lalive
Compliance management systems: A quantum leap for the auditable and externally certifiable process. And it simply makes a huge revival of corporate leadership, values and culture difference in terms of effectiveness. This is because standards, such as ISO Businesses implement compliance programmes to ensure they comply 19600, introduce defined terms (for compliance, compliance culture, com- sustainably and effectively with the law. Given numerous fines imposed pliance function, etc) so that everyone speaks the same language, sets out recently on leading businesses around the globe for repeated, ‘systematic’ the key role of leadership, tone at the top and ethical values and explains infringements of the law, it can be inferred that compliance programmes in what good governance in compliance management requires. Furthermore, general fail to live up to their promise. the ISO standard explains in detail the responsibilities at all levels of an Assuming that, on the whole, corporate compliance programmes are organisation, the planning, implementation and monitoring, measuring indeed less effective than they should be (evidence to the contrary is, of and continual improvement of the best practice compliance management course, always welcome), the question immediately arises about whether processes and tools (from – again – best practice and standards-based risk there is a cure. One of the most prominent developments over the past few management to training and finally to reporting by employees and third par- years has been the introduction of compliance management systems. ties of concerns). A compliance management system is an integrated process based on Interestingly, a comparison of major compliance management sys- strategy, organisation, planning, implementation, monitoring, measuring tem standards shows that there is little difference between them when it and improving best practice compliance measures. It follows the plan- comes to the principles of good compliance governance, the organisation do-check-act method, an iterative four-step management method used in and the processes. Good compliance governance explicitly or implicitly business for controlling and continually improving processes and products. always includes the compliance function’s direct access to the board, its A well-known example of this is the ISO (International Organization for independence from operational management, adequate organisational Standardization) Standard 9001 – Quality Management Systems, which has authority, and availability of appropriate resources. The standards equally been successfully employed by more than a million businesses around the all underline board and top management responsibility for compliance globe. and the essential role of the right tone and good example they set. They Examples of compliance management system standards are Australian also address the key role in day-to-day management of the compliance Standard AS 3806-2006 – Compliance Programmes, German Audit Standard function, and the need for a written compliance policy, professional risk IDW AS 980 – Principles for properly auditing compliance management sys- management (another area with quite some room for improvement), and tems and, most recently, ISO Standard 19600 – Compliance Management specific organisational (clear and easy to understand regulations, credible Systems, the first global compliance management system standard. The and effective reporting mechanisms, etc) and procedural measures (tar- purpose of these standards is to provide guidelines or minimum require- geted training, timely and meaningful support, effective audits, etc). ments for all private and public organisations wanting to design, imple- To conclude, it is time to rethink compliance management and to ment, maintain and improve effective compliance management systems. take it to the next level. An educated and reasonable approach is to imple- But what is the fundamental difference between compliance man- ment a standards-based compliance management system. By doing this, agement based on a stand-alone corporate compliance programme and management adopts the same approach in compliance management that compliance management based on a recognised management system it has most certainly adopted in one way or another in its operative man- standard? The main difference is transparency, confirmability and com- agement of product or service quality. Following a transparent and rec- parability. Whereas classic stand-alone programmes, despite the frequent ognised process, is – in general and in the long run – more effective and high-gloss codes of conduct, are often opaque, rather poorly documented, certainly less costly (including in terms of the cost of non-compliance) bottom-up (ie, single-risk rather than values-oriented) fragmentary com- than a stand-alone, ‘invented here’ approach to compliance management. pliance efforts, compliance management systems based on public stand- All organisations, but in particular small and medium-sized organisations, ards are transparent, top-down, driven by leadership, values and principles will appreciate the low cost of information on the principles of best practice and are comprehensive and well-documented compliance management compliance management and the simplifications associated with doing efforts. what many others do in the same manner. Effective compliance manage- Now this may, to some degree, be theory, but it makes a huge difference ment will thus in future be easier and overall cheaper for all organisations, whether an organisation, private or public, re-invents the wheel of com- both private and public. And this is certainly a considerable gain for the pliance on its own or whether it follows a structured, public, transparent, sustainable management of businesses and for good public management.
14 Getting the Deal Through – Anti-Corruption Regulation 2015 OECD THE OECD FOREIGN BRIBERY REPORT
The OECD Foreign Bribery Report Spotlight on enforcement efforts and a springboard for action
Nicola Bonucci Legal Director, and Leah Ambler Legal Analyst, Anti-Corruption Division * OECD
The OECD Foreign Bribery Report: An analysis of the crime of bribery of procedure,** the Report highlights the need for such procedures to respect foreign public officials was launched by OECD Secretary-General Angél the principles of due process, transparency and consistency, including by Gurría on 2 December 2014. The Report measures, for the first time, making the outcome of the settlement public. the crime of bribery of foreign public officials in international business In shedding light, for the first time, on this complex and covert crime, transactions, based on information obtained from cases that have resulted the OECD Foreign Bribery Report should serve as a springboard to action in definitive sanctions via criminal trial or settlement arrangement. It for those on both sides of the corruption equation. It is hoped that this contains data from 427 cases concluded by law enforcement authorities in report will act as a catalyst for more evidence-based efforts by both public 17 countries between the entry into force of the Convention on 15 February and private sectors to prevent, detect and sanction foreign bribery. 1999 and 1 June 2014. In providing an evidence-based analysis of how foreign public officials * The views in this chapter are those of the authors, and do not reflect the are bribed in international business, the report should enable business to views of the OECD member countries, nor of the states parties to the OECD adapt compliance policies to real operational risks. The OECD Foreign Anti-Bribery Convention. Bribery Report shows that business everywhere is exposed to the risk of corruption and in doing so, establishes some of the factors that companies ** Settlement procedures include corporate probation (Canada); section should take into account when operating in international markets. 153(a) of the Criminal Procedure Code (Germany); plea bargaining (Italy); The Report demonstrates that corruption is a phenomenon that penalty notice (Norway); reparation under article 53 of the Penal Code occurs in all countries, not just the least developed – with 43 per cent of (Switzerland); non-prosecution agreements, deferred prosecution agree- cases involving bribery of public officials from economies with high to very ments and plea agreements (US). high levels of human development. Corruption also takes place in many contexts; although 57 per cent of cases involved bribes to obtain public Two-thirds of bribes were paid to officials in countries higher on the UN procurement contracts, a significant proportion also involve bribery in Human Development Index the context of operational activities, such as customs clearance (16 per Very high 21% cent), favourable tax treatment (6 per cent), licensing and authorisations (6 per cent) and travel visas (1 per cent). Bribes are not confined to offi- High 22% cials at the highest echelons of power, but are paid mainly to employees of Medium 24% state-owned or controlled companies (27 per cent), customs officials (11 per Low 17% cent), health (7 per cent) and defence (6 per cent) officials. The OECD Foreign Bribery Report should also enable governments Unknown 16% to review and adapt their anti-bribery laws and policies to address the risks specific to their companies and relevant markets and tailor their enforce- How were foreign bribery cases brought to the attention of law enforce- ment efforts accordingly. With the OECD Working Group on Bribery in ment authorities? International Business Transactions currently designing the next stage Self-report 31% of country evaluations (Phase 4), the OECD Foreign Bribery Report is a timely stocktake of enforcement efforts over the past 15 years of the OECD Law enforcement 13% Anti-Bribery Convention’s existence. It shows that much remains to be Mutual legal assistance 13% done, with only 17 out of the 41 states parties to the Convention having Media 5% ever concluded a foreign bribery case. Many of the OECD Foreign Bribery Report’s findings confirm the Whistle-blower 2% cross-cutting weaknesses in countries’ implementation of the Convention International 2% identified during the course of the Phase 3 evaluation process. In relation organisation to detection and reporting, the Report shows an extremely low number Investigation into 2% of cases being detected and reported by tax officials, embassy officials, other offence financial intelligence units, public procurement officials and competition authorities. In addition, considering that almost every foreign bribery case Financial 1% intelligence unit requires evidence to be obtained from abroad via mutual legal assistance (MLA), in only 13 per cent of cases did an MLA request spark an investi- Oil-for-food 1% gation in the country which was home to the individual or company who Report from public 1% bribed. The time delays involved in seeking and obtaining MLA also Unknown 29% provide an impediment to efficient and effective enforcement. The Report shows that cases are taking on average five to 10 years to finalise, highlight- Source: OECD analysis of foreign bribery cases concluded between ing the need for provisions to suspend and interrupt the limitation period. 15 February 1999 and 1 June 2014. Finally, with 69 per cent of cases being concluded by way of settlement
www.gettingthedealthrough.com 15 ALGERIA Goussanem & Aloui Law Firm
Algeria
Khaled Goussanem and Salima Aloui Goussanem & Aloui Law Firm
1 International anti-corruption conventions 5 Travel and entertainment restrictions To which international anti-corruption conventions is your To what extent do your anti-bribery laws restrict providing country a signatory? foreign officials with gifts, travel expenses, meals or entertainment? The United Nations Convention against Corruption, adopted on 31 October 2003, ratified by Algeria pursuant to Presidential Decree No. 04-128 dated The law prohibits providing foreign officials with gifts, travel expenses, 19 April 2004. meals or entertainment if they are likely to influence the processing of a The African Union Convention on the Prevention and Fight against procedure or a transaction related to its functions. Corruption, adopted in Maputo on 11 July 2003, ratified by Algeria pursu- ant to Presidential Decree No. 06-137 dated 10 April 2006. 6 Facilitating payments Do the laws and regulations permit facilitating or ‘grease’ 2 Foreign and domestic bribery laws payments? Identify and describe your national laws and regulations prohibiting bribery of foreign public officials (foreign bribery The law does not allow facilitating or ‘grease’ payments. These fall within the scope of the bribery provisions. laws) and domestic public officials (domestic bribery laws). Act No. 06-01 of 20 February 2006 on the Prevention and Fight against 7 Payments through intermediaries or third parties Corruption, modified and amended by Ordinance No. 10-05 of 26 August In what circumstances do the laws prohibit payments through 2010 and Act No. 11-15 of 2 August 2011. intermediaries or third parties to foreign public officials? Ordinance No. 07-01 of 14 March 2007 concerning incompatibilities and specific obligations related to certain jobs and functions. The law prohibits payments to foreign public officials whether carried out directly or indirectly, that is, through intermediaries or third parties. Foreign bribery Therefore, in the case of payments through intermediaries, the courts must determine whether the accused had knowledge that the third party 3 Legal framework was going to divert payments to pay bribes. Describe the elements of the law prohibiting bribery of a foreign public official. 8 Individual and corporate liability Promising, offering or giving to a foreign public official or an official of a Can both individuals and companies be held liable for bribery public international organisation, directly or indirectly, an undue advan- of a foreign official? tage, for himself or for another person or entity, in order that the official Both individuals and companies can be held liable for bribery of a foreign acts or refrains from performing an act in the exercise of its functions, in official. order to obtain or retain business or other improper advantage in connec- tion with international trade or other benefit. 9 Civil and criminal enforcement The fact that a foreign public official or an official of a public inter- national organisation solicits or accept, directly or indirectly, an undue Is there civil and criminal enforcement of your country’s advantage for himself or for another person or entity, in order that the foreign bribery laws? official acts or refrains from performing any act relating to his obligations. Foreign bribery laws are enforced in Algeria through criminal procedures. Private parties may solicit damages in the course of criminal procedures 4 Definition of a foreign public official as civil parties. How does your law define a foreign public official? 10 Agency enforcement Any person holding an administrative, judicial, legislative or executive mandate, in a foreign country, whether appointed or elected. What government agencies enforce the foreign bribery laws Any person exercising a public function for a foreign country, includ- and regulations? ing a public agency or public enterprise. Any officer of an international agency or any person authorised by the Bribery laws are enforced in Algeria through criminal procedures. There is organisation to act on its behalf. no specific government agency responsible for the enforcement of bribery laws. The enforcement is conducted by the public prosecutor, who is informed about bribery irregularities by agencies such as TRACFIN, the Algerian financial intelligence unit responsible for collecting information about suspicious financial operations, and by the National Organisation for the Prevention and Fight Against Corruption (ONPLC).
16 Getting the Deal Through – Anti-Corruption Regulation 2015 Goussanem & Aloui Law Firm ALGERIA
11 Leniency Financial record keeping Is there a mechanism for companies to disclose violations in 17 Laws and regulations exchange for lesser penalties? What legal rules require accurate corporate books and records, The briber or intermediary, perpetrator or accomplice, who, before any effective internal company controls, periodic financial proceedings, reveals a violation to the administrative or judicial authorities statements or external auditing? and identifies other briber, intermediary, perpetrator or accomplice ben- efits from an acquittal plea in accordance with the Criminal Code. • The Algerian Commercial Act; The maximum sentence for any person or accomplice, which, after the • the Tax Act; and opening of the procedure, facilitated the arrest of one or more persons, will • Act No. 04-08 of 14 August 2004 concerning the conditions for carry- be reduced by half. ing out commercial activities.
12 Dispute resolution Companies are required to file the annual accounts, the annual report and the auditors’ report and, if applicable, the consolidated financial state- Can enforcement matters be resolved through plea ments, the group annual report, the auditors’ report on the consolidated agreements, settlement agreements, prosecutorial discretion financial statements and the report of the supervisory board or the board or similar means without a trial? of directors. Enforcement matters cannot be resolved through plea agreements, settle- 18 Disclosure of violations or irregularities ment agreements, prosecutorial discretion or similar means without a trial. To what extent must companies disclose violations of anti- 13 Patterns in enforcement bribery laws or associated accounting irregularities? Describe any recent shifts in the patterns of enforcement of the Any person who, by its permanent or temporary function or profession, foreign bribery rules. becomes aware of one or more offences under the anti-bribery laws, and does not inform in time the competent public authorities, shall be pun- Not available. ished by imprisonment of six months to five years and a fine of 50,000 to 500,000 dinars. 14 Prosecution of foreign companies In what circumstances can foreign companies be prosecuted 19 Prosecution under financial record keeping legislation for foreign bribery? Are such laws used to prosecute domestic or foreign bribery? Foreign companies cannot be prosecuted if the elements of the bribery Such laws are used to prosecute domestic bribery and can also be used to take place entirely outside Algeria. prosecute foreign bribery subject to reciprocity and when treaties, agree- ments, arrangements and the laws permit. 15 Sanctions What are the sanctions for individuals and companies violating 20 Sanctions for accounting violations the foreign bribery rules? What are the sanctions for violations of the accounting rules Individuals associated with the payment of bribes? Sanctions imposed on individuals violating foreign bribery laws and regu- Not available. lations are a maximum term of 10 years’ imprisonment and a minimum of two years’ imprisonment, and a penalty from 200,000 to 1 million Algerian 21 Tax-deductibility of domestic or foreign bribes dinars. Additional penalties are legal prohibition, loss of civil rights, confisca- Do your country’s tax laws prohibit the deductibility of tion of the sums or objects unlawfully proffered or the sum representing domestic or foreign bribes? the benefit of the corruption and banishment from Algerian territory. Algeria’s tax laws prohibit the deductibility of domestic or foreign bribes.
Companies Domestic bribery • Dissolution of the corporation; • prohibition from undertaking permanently or for a period not 22 Legal framework exceeding five years, either directly or indirectly, the professional or Describe the individual elements of the law prohibiting bribery social activity in which or on the occasion of which the offence was of a domestic public official. committed; • placement under judicial supervision for a period not exceeding five Describe the individual elements of the law prohibiting bribery of a domes- years; tic public official. • closing of the establishment or any of its subsidiaries used to commit A domestic public official promising, offering or giving to a domestic the offence for a period not exceeding five years; public official, directly or indirectly, an undue advantage, for himself or for • disqualification from public contracts for a period not exceeding five another person or entity, in order that the official acts or refrains from per- years; and forming an act in the exercise of its functions, in order to obtain or retain • the sums or objects unlawfully proffered or given or the sum represent- business or other improper advantage. ing the benefit of the corruption may be confiscated. The fact that a domestic public official solicits or accepts, directly or indirectly, an undue advantage for himself or for another person or entity, 16 Recent decisions and investigations in order that the official acts or refrains from performing any act relating to his obligations. Identify and summarise recent landmark decisions or Approves, revises a contract, agreement or revision in violation of laws investigations involving foreign bribery. and regulations to provide an unfair advantage to others. Not available. Judicial and administrative decisions are not systematically A domestic public official who, during the preparation, negotiation, reported. conclusion or performance of a contract, agreement or revision concluded on behalf of the state or local authorities or public administrative institu- tions or industrial and commercial public establishments or public eco- nomic enterprises, collects or attempts to collect, directly or indirectly, for himself or for a third party, remuneration or benefit of any kind. A domestic public official who withholds, destroys, disposes or keeps, knowingly and improperly, for its own benefit or for the benefit of another www.gettingthedealthrough.com 17 ALGERIA Goussanem & Aloui Law Firm person or entity, any property, money or securities, public or private, or 26 Travel and entertainment anything of value, under or by virtue of his function. Describe any restrictions on providing domestic officials A domestic public official who solicits, receives, demands or orders to with gifts, travel expenses, meals or entertainment. Do the collect what it knows not to be due or exceed what is owed, for himself, or restrictions apply to both the providing and receiving of such for the administration or others parties. A domestic public official who, without legal authorisation, in any benefits? form, for any reason, grants or orders exemptions to duties, franchises, The law prohibits providing domestic officials with gifts, travel expenses, taxes or public charges or makes free the delivery of products of state meals or entertainment if they are likely to influence the processing of a establishments. procedure or a transaction related to its functions. A domestic public official who accepts, directly or indirectly, an undue advantage for himself or for another person to abuse his real or supposed 27 Gifts and gratuities influence to obtain from an administration or public authority an unfair advantage. Are certain types of gifts and gratuities permissible under your Intentionally abusing his duties or position by performing or refrain- domestic bribery laws and, if so, what types? ing from acting in the exercise of his functions, acting in violation of laws There are no types of gifts and gratuities permissible under Algerian brib- and regulations to obtain an undue advantage for himself or another per- ery laws. son or entity. 28 Private commercial bribery 23 Prohibitions Does your country also prohibit private commercial bribery? Does the law prohibit both the paying and receiving of a bribe? Algerian legislation prohibits commercial bribery. Measures for the pro- The law prohibits both the paying and the receiving of a bribe under the hibition of corruption in the private sector are contained in the law, and criminal offences known either as active or passive corruption. Soliciting disciplinary, effective, appropriate and dissuasive sanctions are planned, or offering a bribe is also prohibited. such as: • strengthening cooperation between law enforcement agencies and 24 Public officials private entities; How does your law define a public official and does that • development of standards and procedures designed to safeguard the definition include employees of state-owned or state- integrity of relevant private entities, including codes of conduct for controlled companies? business and all relevant professions to operate in a fair, respectable and proper way to prevent conflicts of interest and to encourage the Any person holding a legislative, executive, administrative, judicial man- use of good commercial practices among businesses and in the con- date, or in a popular local elected assembly, whether appointed or elected, tractual relations with the state; permanent or temporary, paid or unpaid, and whatever level hierarchy or • promoting transparency among private entities; seniority. • preventing the misuse of procedures regulating private entities; and Any other person entrusted with a function or a mandate, even tempo- • implementation of internal audits to private companies. rary, paid or unpaid who contributes, as such, to a public service or a public company, or other business in which the state owns all or part of its capital, In addition, accounting standards and audits used in the private sector or any other company that provides a public service. must contribute to the prevention of corruption by prohibiting: Any other person defined as a public officer or who is considered such • the establishment of off-the-books accounts; in accordance with the laws and regulations. • the books or inadequately identified transactions; The definition include employees of state-owned or state-controlled • the recording of non-existent expenditures or liabilities whose object companies. is not properly identified; • the use of false documents; and 25 Public official participation in commercial activities • the intentional destruction of bookkeeping documents before the end Can a public official participate in commercial activities while of the period prescribed by the laws and regulations. serving as a public official? A public official cannot participate in commercial activities while serving as a public official.
Goussanem & Aloui Law Firm
Khaled Goussanem Salima Aloui
02 rue Omar Bencheickh Tel: +213 77 0902516 Larbi Ben M’hidi Fax: +213 21 746525 Alger-centre [email protected] Algiers Algeria
18 Getting the Deal Through – Anti-Corruption Regulation 2015 Goussanem & Aloui Law Firm ALGERIA
29 Penalties and enforcement • closing of the establishment or any of its subsidiaries used to commit What are the sanctions for individuals and companies violating the offence for a period not exceeding five years; • disqualification from public contracts for a period not exceeding five the domestic bribery rules? years; and Individuals • the sums or objects unlawfully proffered or given or the sum represent- Sanctions imposed on individuals violating bribery laws and regulations ing the benefit of the corruption may be confiscated. are a maximum term of 20 years’ imprisonment and a minimum of six months’ imprisonment, and a penalty from 200,000 to 2 million dinars. 30 Facilitating payments Additional penalties are legal prohibition, loss of civil rights, confisca- Have the domestic bribery laws been enforced with respect to tion of the sums or objects unlawfully proffered or the sum representing facilitating or ‘grease’ payments? the benefit of the corruption and banishment from Algerian territory. Algerian law considers facilitating payments as bribery. Companies • Dissolution of the corporation; 31 Recent decisions and investigations • prohibition from undertaking permanently or for a period not Identify and summarise recent landmark decisions and exceeding five years, either directly or indirectly, the professional or investigations involving domestic bribery laws, including any social activity in which or on the occasion of which the offence was investigations or decisions involving foreign companies. committed; • placement under judicial supervision for a period not exceeding five Not available. years;
www.gettingthedealthrough.com 19 ARGENTINA Governance Latam · Guillermo Jorge, Fernando Basch & Asociados
Argentina
Fernando Basch and Guillermo Jorge Governance Latam · Guillermo Jorge, Fernando Basch & Asociados
1 International anti-corruption conventions 4 Definition of a foreign public official To which international anti-corruption conventions is your How does your law define a foreign public official? country a signatory? Argentine law lacks an autonomous definition of foreign public official. A Argentina signed and ratified the Inter-American Convention against definition modelled after the OECD Convention was proposed in an early Corruption (IACAC) in 1997, the OECD Convention on Combating version of the draft bill of Law No. 25,825, but was ultimately rejected. Bribery of Foreign Public Officials in International Business Transactions Argentine law does define the terms ‘public official’ and ‘public (OECD Convention) in 2001, and the United Nations Convention against employee’ in article 77 ACC, as ‘any person who temporarily or perma- Corruption (UNCAC) in 2006. nently participates in public functions, whether as a result of popular election or appointment by the competent authority’. This definition has 2 Foreign and domestic bribery laws always been interpreted as a functional definition, taking public official or employee to mean any person who – beyond his or her formal or admin- Identify and describe your national laws and regulations istrative status – has actually been exercising public functions during his prohibiting bribery of foreign public officials (foreign bribery or her participation in the criminalised conduct (see question 24). Taking laws) and domestic public officials (domestic bribery laws). into account that the language of this definition is not specific to national The legal framework punishing bribery is established in articles 256 to 259 officials, it could be interpreted as including public officials from foreign of the Argentine Criminal Code (ACC). Article 256 ACC punishes domestic states and international organisations. However, there has not yet been any public officials who directly or indirectly receive money or any other item case law confirming such interpretation. of value in exchange for doing, delaying or omitting to do certain actions relating to their public duties or activities. The active bribery of a public 5 Travel and entertainment restrictions official is also punished in article 258 ACC. To what extent do your anti-bribery laws restrict providing In 1999, Law No. 25,188 introduced the offence of bribery of foreign foreign officials with gifts, travel expenses, meals or public officials in article 258-bis ACC. Four years later, and following an entertainment? OECD recommendation, Law No. 25,825 amended article 258-bis ACC, to also cover the bribery of officials of international organisations. Argentine anti-bribery laws do not specifically restrict providing foreign Both public officials and owners, shareholders, director, representa- officials with gifts, travel expenses, meals or entertainment, but only as tives and employees of legal persons are subject to criminal sanctions. far as they represent a quid pro quo constituting the offence of bribery of Legal persons are only criminally liable for laundering the proceeds of foreign public officials (see questions 26 and 27 below). Nonetheless, if the bribery (article 304 ACC), but not for corruption itself. They are, nonethe- expression ‘public officials’ covers, as we believe, ‘foreign public officials’, less, subject to the confiscation of proceeds of bribery (article 23 ACC). they should be treated in accordance with the ‘gift’ regime (see question 26). Laundering the proceeds of bribery is also punished by the ACC (arti- cle 303 et seq). Further, a criminal conviction of bribery might also trigger 6 Facilitating payments consequences in the public procurement area (ie, annulment of contracts Do the laws and regulations permit facilitating or ‘grease’ and debarment). payments?
Foreign bribery No. Argentine legislation does not provide a facilitation payment excep- tion, nor any value threshold. Hence, if given to a public official, facilitating 3 Legal framework payments could be characterised as bribery offences under the ACC. Describe the elements of the law prohibiting bribery of a foreign public official. 7 Payments through intermediaries or third parties Article 258-bis ACC criminalises the active bribery of a foreign public In what circumstances do the laws prohibit payments through official. The elements of the offence are as follows: intermediaries or third parties to foreign public officials? • for any person The bribery of a foreign public official offence can be committed either • to offer or give directly or indirectly (article 258-bis), hence the use of intermediaries or • a public official from a foreign state, or from an international public third parties to channel bribes is prohibited in all circumstances. organisation, • personally or through an intermediary, 8 Individual and corporate liability • money or any object of pecuniary value, or other benefits such as gifts, favours, promises or benefits, Can both individuals and companies be held liable for bribery • for his or her own benefit or for the benefit of a third party, of a foreign official? • related to his or her office or to use the influence derived from the Individuals can be held liable both in criminal and civil (and administra- office he or she holds tive) courts for bribery of a foreign public official. • in an economic, financial or commercial transaction. Companies can be held civilly or administratively liable, but cannot be held criminally liable for foreign bribery offences. So far, corporate crimi- nal liability has been established in Argentina only for money-laundering
20 Getting the Deal Through – Anti-Corruption Regulation 2015 Governance Latam · Guillermo Jorge, Fernando Basch & Asociados ARGENTINA and terrorist-financing offences, for concealment, insider trading and other However, upon the Prosecutor’s Office request, the court may decide forms of securities fraud (articles 303 to 313 ACC), for some tax offences to try the case through an abbreviated trial – prosecution and defence can (Law No. 24,769 modified by Law No. 26,735, article 14), for some cus- reach an agreement about guilt and sentence at the time of the beginning toms offences (Law No. 22,415, article 887), for some currency-exchange of the oral trial phase provided that the requested penalty does not exceed offences (Law No. 19,359, article 2f), and in application of other specific six years’ imprisonment and the defendant accepts the charges and agrees regulatory regimes such as antitrust law (Law No. 25,156, article 47), the to conduct the proceedings in such manner (article 431-bis CPC). internal supply (Law No. 20, 680 modified by Law 26,991, article 8). Thus, Civil matters, on the other hand, may be settled. in Argentina, no company can be held criminally liable for foreign bribery offences unless the act of foreign bribery could be construed as any of the 13 Patterns in enforcement aforementioned specific offences. In any case, companies can be subject to Describe any recent shifts in the patterns of enforcement of the forfeiture of the proceeds of bribery (see question 15). foreign bribery rules. 9 Civil and criminal enforcement Foreign bribery laws were introduced in 2003, but the few reported cases Is there civil and criminal enforcement of your country’s to date offer no discernible enforcement pattern, neither has any convic- tion or preliminary judicial decision been reached so far. In the Phase 3 foreign bribery laws? OECD Report of December 2014, the Working Group still reflects the lack Yes, the Argentine legal framework provides for civil and criminal enforce- of convictions regarding foreign bribery. Besides, no up-to-date statistics ment of foreign bribery laws (see question 15). are available in this field; available statistics regarding foreign bribery cases are limited to the period 2004–2008 (during which only five cases 10 Agency enforcement were opened in the country). Few new cases have been opened on foreign What government agencies enforce the foreign bribery laws bribery claims in recent years, but no relevant progress has been made (see question 16). and regulations? The enforcement authorities for foreign bribery laws and regulations are 14 Prosecution of foreign companies the same as those in charge of enforcing the domestic bribery rules. In what circumstances can foreign companies be prosecuted The enforcement of the anti-bribery criminal framework falls to for foreign bribery? public prosecutors and investigative magistrates (investigation) and courts (adjudication). In Argentina, there is no corporate criminal liability for bribery or foreign Public prosecutors are part of the structure of the Public Prosecutor’s bribery (see question 8), so foreign companies (just as domestic companies) Office (MP), an independent and autonomous constitutional body (arti- cannot be prosecuted for foreign bribery. However, the proceeds of foreign cle 120 of the Constitution). There are two specialised agencies within bribery can be confiscated from foreign companies (see question 15). the MP: the National Prosecutor’s Office of Administrative Investigations (FNIA), which is designed to play a role in prosecuting domestic corrup- 15 Sanctions tion offences, and the Special Office for Economic Crime and Money What are the sanctions for individuals and companies violating Laundering, a specialised agency recently created to investigate and pros- the foreign bribery rules? ecute money-laundering, terrorist-financing, and offences against the public administration, among other economic crimes. Both agencies can Criminal sanctions carry out preliminary investigations. The FNIA, however, has no jurisdic- Individuals tion to investigate foreign bribery unless state funds or federal officials are Pursuant to article 258-bis ACC, the sanction for foreign bribery is a ‘reclu- involved, which is rarely the case. Once the case is filed with an investiga- sion’ term of one to six years and perpetual disqualification from hold- tive magistrate, it plays only an auxiliary role to the competent prosecutor ing public office. This is the same sanction that is applicable for domestic attached to the magistrate’s court. bribery offences (see question 29). The criminal sanction of reclusion Finally, the Anti-corruption Agency (OA), institutionally dependent is in practice just the same as that of prison (the ACC provided a regime on the Ministry of Justice and Human Rights and within the structure of of imprisonment with fewer benefits for reclusion terms, although such the Executive Power, may receive complaints from private individuals aggravated regime was successfully challenged before the Argentine and public officials, as well as investigating corruption within the national Supreme Court in 2005). administration through its investigation division. The OA’s jurisdiction is Further, pursuant to article 22-bis ACC, a fine of up to 90,000 pesos similar to that of FNIA and only extends to foreign bribery in very excep- may be imposed in addition to the reclusion sentence, where the foreign tional cases. This office is able to report bribery and advance administra- bribery offence is committed ‘with the aim of a monetary gain’. Further, tive, civil and criminal proceedings, and to act as the plaintiff thereof when upon conviction individuals are subject to confiscation of the bribe and the state assets are affected. It also has legal standing to propose investigative proceeds of bribery (article 23.3 ACC). measures and evidence, as well as to appeal against decisions that are counter to its claims. Additionally, the OA is in charge of elaborating and Legal persons coordinating the different anti-corruption public programmes. While Argentine criminal law does not recognise corporate criminal liabil- In non-federal cases, most provinces have no specialised agencies, ity for bribery offences, it does provide for the confiscation of the bribe and although some of them have established some sort of anti-corruption unit. the proceeds of bribery. Thus, article 23 ACC provides for the mandatory forfeiture upon conviction of the goods used to commit the offence, as well 11 Leniency as of the goods and product, or profit, obtained from the offence. Further sanctions (fines, suspension of activities, debarment from Is there a mechanism for companies to disclose violations in participating in public contracts, cancellation of legal status and any state exchange for lesser penalties? benefit that the company might have been receiving) apply to companies No such mechanism is provided for bribery offences in Argentine sentenced for money laundering, terrorist financing and the other eco- legislation. nomic offences mentioned in articles 304 to 313 ACC (see question 8), but not for bribery offences. 12 Dispute resolution Non-criminal sanctions Can enforcement matters be resolved through plea Public procurement restrictions agreements, settlement agreements, prosecutorial discretion In the field of public procurement, according to article 10 of Executive or similar means without a trial? Decree 1023/2001, contracts procured through bribery must be terminated, and proposals or offers must be rejected at any stage of the bid. Further, As a general rule, criminal cases must be subject to criminal prosecu- according to Executive Decree 1023/2001 (article 28), any person convicted tion and cannot be resolved through settlements or plea agreements. for any wilful criminal offence or criminally prosecuted for offences against According to the principle of legality (article 71 ACC) prosecutors are not the National Public Administration or established by the IACAC (which allowed discretion. covers certain forms of international bribery), is, inter alia, debarred from www.gettingthedealthrough.com 21 ARGENTINA Governance Latam · Guillermo Jorge, Fernando Basch & Asociados being awarded public contracts with the National Public Administration, and clear justification for each transaction are recorded. For this purpose, including all public works, licences and public services contracts. Further traders must keep ‘books of original entries’ and ‘inventory and balance sanctions may apply, such as warnings, fines and suspension of activi- sheets’ (articles 43 to 45). In keeping books, insertion, deletion and modi- ties (for corporations), and personal suspension and disqualification (for fication of entries are forbidden (articles 51 and 54). Books ‘considered as individuals). indispensable’ under the Code of Commerce must be submitted to the Companies Registry of the domicile of the trader (article 53). 16 Recent decisions and investigations In 2015, a new and unified Civil and Commercial Code will enter into Identify and summarise recent landmark decisions or force. The obligations will remain the same. The National Securities Commission (CNV) issues accounting stand- investigations involving foreign bribery. ards for listed entities pursuant to Law No. 26,831 (the Stock Market Act). The IMPSA case The Stock Market Law requires listed entities to report relevant aspects of Involving CBK Power Company (an Argentine–US joint venture, the two their corporate and financial plan, the investment plans, decision making shareholders of which are Industrias Metalúrgicas Pescarmona (IMPSA) processes and their internal control systems in their internal annual report and Edison Mission Energy), the case was brought in 2006 (file No. 9421/06 (Stock Market Act, article No. 60 [c]). It also establishes a transparency of the Federal Criminal Judge No. 12, Judge Sergio Torres, Secretary No. regime which requires administrators and members of the monitoring 23, Ministerio de Relaciones Exteriores, Comercio Internacional y Culto s/ organ to submit to the National Securities Commission any information denuncia). It relates to alleged bribes paid to a former minister of justice in that could affect the placement of securities or its negotiation (Stock connection with a hydroelectric construction and operation project in the Market Act, article No. 99 [a]). The Commercial Registry IGJ) generally Philippines. Former Philippine President Joseph Estrada denied the allega- accepts the professional standards set by the Argentine Federation of tions and reportedly said instead that IMPSA had offered to pay US$14 mil- Professional Councils on Economics (FACPCE). The Argentina Central lion, but the Philippine government never accepted the deal. Philippines Bank sets standards for financial institutions and the National Insurance informed Argentina that the case did not involve bribery to obtain a con- Regulator regulates insurance companies. tract. On 17 October 2012, the investigative magistrate decided to close the Only listed companies are required to have an external auditor report case (see OECD Working Group on Bribery, Argentina, Phase 3 Report of on their annual financial statements. For some unlisted companies there 18 December 2014. Available at: www.oecd.org/corruption/anti-bribery/ are partial substitutes for external audits (for instance, a síndico, which is a Argentina-Phase-3-Report-ENG.pdf). form of statutory auditor). Regarding state-owned companies, the Financial Administration Law The Catler case (Law No. 24,156) provides that they are subject to accounting rules devel- Brought in 2009, the case involves Catler Uniservice (an Argentine– oped by the National Accounting Office. Two regulatory bodies have a Bolivian joint venture) and its Argentine suppliers Sica Metalúrgica and mandate to control state-owned companies: the Office of the Comptroller Lito Gonella e Hijos de Santa Fé. Catler Uniservice allegedly bribed General, which is responsible for internal controls and reports to the presi- Bolivian officials to obtain a US$88 million contract from the state-owned dency, and the Office of the National Auditor General, which is responsible company YPFB (Yacimientos Petrolíferos Fiscales Bolivianos) in order to for external controls and reports to Congress. build a hydroelectric plant in the city of Santa Cruz, Bolivia, in 2008. A par- The CNV has developed a Corporate Governance Code which gener- allel investigation was opened in Bolivia and finally led to the conviction of ally adopts a ‘comply or explain’ approach. the YPFB president and other individuals. The investigation in Argentina was dismissed on the grounds that the information provided by Bolivia was 18 Disclosure of violations or irregularities insufficient (OECD Working Group). To what extent must companies disclose violations of anti- The Antonini Wilson case bribery laws or associated accounting irregularities? The case involves a dual Venezuelan-USA citizen – Antonini Wilson – who Disclosure of violations of anti-bribery laws or associated accounting did not declare a suitcase brought in Argentina through a private flight hired irregularities is voluntary. However, as there are no formal leniency rules by Argentina and Venezuela officials with US$800,000 in 2007. In mid- (see question 11), companies have no formal incentives to inform the August 2007, Argentine parliamentarians filed a criminal complaint alleg- authorities of any violations. ing transnational bribery and money laundering. The case was filed with charges on smuggling, but the investigation started as a foreign bribery case. 19 Prosecution under financial record keeping legislation
The River Dredging case Are such laws used to prosecute domestic or foreign bribery? The Comisión Administradora del Río de la Plata (CARP) was created by Financial record keeping laws are not usually used to prosecute cases of treaty between Argentina and Uruguay in 1973. Its purpose is to regulate bribery or even accounting misconduct. However, in the Skanska case (see and manage issues regarding the river Rio de la Plata and which involve question 31) the discovery of false invoices triggered an investigation of these two countries. The Commission consists of government officials from alleged domestic bribery. Argentina and Uruguay. An Uruguay company was in charge to dredge a canal in the Rio de la Plata. As the contract neared its expiration in 2012, 20 Sanctions for accounting violations an Argentine CARP member allegedly offered a Uruguayan CARP mem- ber a bribe on behalf of Argentine company to facilitate the contract’s What are the sanctions for violations of the accounting rules renewal. Argentine stated that the investigation of the alleged bribe-payer associated with the payment of bribes? had been terminated in May 2014 because of a lack of co-operation from Although there are no specific sanctions for violations of accounting Uruguay. Argentina had opened an investigation in May 2012 after receiv- rules associated with the payment of bribes (different from that of bribes ing complaints from two parliamentarians. Four MLA requests were sent themselves), article 300(3) ACC sets out the accounting fraud offence, to Uruguay, two of which were refused. A further MLA request to a third establishing a sanction of six months to two years’ imprisonment for the country seeking the testimony of the Uruguayan CARP member was denied founder, director, trustee, liquidator or síndico of a corporation or coop- because the official claimed diplomatic immunity. Currently, the decision erative, or of any other legal person who knowingly publishes, certifies or to close the case has been overturned by the Federal Court of Appeals. authorises an either false or incomplete inventory, balance sheet, profit and loss account or related reports on any event material to the assess- Financial record keeping ment of the company’s financial position, whatever the purpose sought. 17 Laws and regulations Moreover, according to Law No. 26,831, the CNV can conduct inspections and apply sanctions to both individuals and listed companies (including What legal rules require accurate corporate books and records, warnings, fines, professional disqualifications and suspensions for public effective internal company controls, periodic financial bidding capacities). To date, however, the CNV has not initiated adminis- statements or external auditing? trative proceedings for accounting misconduct on the basis of a criminal Under the Argentine Code of Commerce, all ‘traders’ must report their case of domestic corruption or bribery. transactions and keep commercial accounts in which a true description
22 Getting the Deal Through – Anti-Corruption Regulation 2015 Governance Latam · Guillermo Jorge, Fernando Basch & Asociados ARGENTINA
The IGJ has also the power to impose sanctions on the individuals 24 Public officials and entities that do not furnish information, provide false data, or in any How does your law define a public official and does that way infringe their legal obligations (Law No. 22,315, articles 12 and 14). definition include employees of state-owned or state- Applicable sanctions include warnings and fines. controlled companies? Lastly, both the FACPCE and the CNV have enforcement powers with regards to auditors, trustees, directors and síndicos, and may impose fines According to section 77 ACC, public official or employee refers to any and other sanctions such as the withdrawal of professional licences. official or employee of the state or its agencies, including those who have been permanently or temporarily selected, either appointed by competent 21 Tax-deductibility of domestic or foreign bribes authority or elected by the population to perform activities or functions in Do your country’s tax laws prohibit the deductibility of the name of the state or in the service of the state, at any level. domestic or foreign bribes? Case law has consistently interpreted this definition as a functional definition of public official, including any person that directly or indirectly Argentine tax law does not explicitly prohibit the deductibility of bribes. It exercises public duties or functions. According to the functional definition, provides for lists of expenses that are deductible and non-deductible, and every official or employee of a state-owned company or a state-controlled bribes are not expressly covered by either of them. Tax law does, however, company should be considered a public official or employee as long as he address the non-deductibility of net losses resulting from ‘illegal opera- or she is performing public functions, ie, if the individual actually has the tions’ (article 88 [j] of the Income Tax Law, ordered by Executive Decree capacity to carry out the will of the state through the functions he or she 649/97). exercises (Federal Criminal Appeal Court, Case 12,180, Testimonio de la Nonetheless, despite a number of deductible items listed in the apelación del dictado de falta de mérito en relación a Félix Alberto Nicolini y Income Tax Law could potentially be misused to obtain tax deductibility otros en Expte No. 495, 29 May 1996). It should be noted that courts will of bribes (such as ‘expenses and other expenditures inherent to the course determine whether an individual is a public official or employee under of business’ (article 87 [a]), and ‘entertainment expenses [for person- article 77 ACC on a case-by-case basis, depending on the specific facts of nel on the company’s payroll] (article 87 [i]). The Argentine government the case and under such criteria. has stated before the OECD Working Group on Bribery in International Business Transactions (see the Follow-Up Report on the Implementation 25 Public official participation in commercial activities of the Phase 2 Recommendations, 3 September 2010, and Phase 3 Can a public official participate in commercial activities while Recommendations, 18 December 2014, respectively), that the deduct- serving as a public official? ibility of bribes is implicitly prohibited by Argentine tax law. Article 37 of the Income Tax Law states that when an expenditure lacks documentation Generally, a public official can participate in commercial activities while and it was not proved by other means that by its nature it should have been serving, as long as the commercial activity is not considered to be in made to obtain, maintain and retain taxable income, its deductibility is not conflict with his or her function. Law No. 25,188 on Ethics in Public Office allowed (and it will also be subject to further payments). Further, on the regulates public officials’ conflicts of interest. basis of that rule, in practice the Argentine Revenue Agency challenges Article 13 (b) of Law No. 25,188 establishes that it is incompatible for every claimed deduction not adequately documented and clearly linked to public officials to be suppliers by themselves or on behalf of third parties regular business practices. The onus always rests on the taxpayer to prove in any public agency in which they perform public duties. Further, presi- deductibility with adequate documentation. dential appointees, such as the head of the cabinet, ministers, secretaries and undersecretaries, are reached by the Ministries Act (Ordered Text Domestic bribery Decree 438/92), which establishes that – with the sole exception of teach- ing during their tenure – they must refrain from any commercial activity, 22 Legal framework business, enterprise or profession that is directly or indirectly connected Describe the individual elements of the law prohibiting bribery with national, provincial or municipal powers, agencies or companies (arti- of a domestic public official. cle 24, Decree 438/92), and that they may not engage in freelance profes- sional activities or activities in which, despite the state having no interest The ACC defines bribery as the act by which any public official (including therein, their position as an official might sway the decision of the compe- judges and public prosecutors), either personally or by means of an inter- tent authority or disrupt the principle of equality before the law enshrined mediary, receives money or any other object of pecuniary value, or accepts in article 16 of the Constitution (article 25, Decree 438/92). a promise of such in order to do, delay, or not to do something in relation to Though clearly established, there are neither sanctions applicable nor his or her duties (article 256, 257 ACC). any enforcement agency with authority over these conflicts-of-interest The law also punishes the act of requesting or receiving money or any rules. Therefore, if any governmental agency concludes that there is a other object of pecuniary value (personally or through an intermediary), violation of the Ministries Act, its scope of action is limited to informing or directly or indirectly accepting a promise of such in order to make an the President on the matter. unlawful use of the person’s influence before any public official with the Civil magistrates and judges are prohibited from engaging in com- purpose of having such official act, delay or refrain from acting in relation merce in the territory where they exercise their authority and jurisdiction to his or her duties, or issue, decree, delay or omit any resolution, sentence on a permanent basis (article 22, Code of Commerce). or judgment concerning any matter under his or her jurisdiction (article 256-bis ACC). 26 Travel and entertainment Last, it is also an offence for any person to give or offer, personally or through an intermediary, any object of pecuniary value for the purpose Describe any restrictions on providing domestic officials of obtaining any of the acts previously described from any public official with gifts, travel expenses, meals or entertainment. Do the (article 258 ACC). restrictions apply to both the providing and receiving of such benefits? 23 Prohibitions The approach taken by Law No. 25,188 on Ethics in Public Office is that Does the law prohibit both the paying and receiving of a bribe? public officials are prohibited from accepting gifts given in relation to their Yes. The ACC not only punishes public officials for soliciting or accept- public functions, unless they were given out of courtesy or diplomatic cus- ing bribes or gifts (articles 256, 256-bis, 257, 259, ACC) but also punishes tom. Article 18 of the said law provides that public officials may not receive whoever offers such a bribe or gift (articles 258, 259, ACC). gifts or donations of any kind, including goods or services given in rela- tion to their official activities or function, and that those received out of courtesy or diplomatic custom should be registered and incorporated into the state’s heritage only for purposes of health, social welfare, education or to the cultural–historical heritage (although the law refers to the need to detail this rule through implementing legislation, the existing implement- ing legislation has not further regulated this regime). The law is applicable to all persons who perform public functions at all levels and hierarchies, www.gettingthedealthrough.com 23 ARGENTINA Governance Latam · Guillermo Jorge, Fernando Basch & Asociados permanently or temporarily, by election, direct appointment, by compe- small gifts are beyond the scope of the offence, and that small gifts can be tition or any other legal means, including all government magistrates, defined as gifts that lack economic value. officials and employees. The implementing legislation does not establish any limit on the value 28 Private commercial bribery of courtesy gifts (article 21 of Decree 164/99). It only broadens the scope of Does your country also prohibit private commercial bribery? article 18 by establishing the prohibition of accepting benefits or rewards as well. No. Private commercial bribery is not expressly prohibited in Argentina The enforcement agency of Law No. 25,188, the OA, issued several except under article 312 ACC. This is limited to the passive bribery of advisory opinions establishing that officials are prohibited to accept gifts employees and officers of financial and stockmarket institutions who, from natural or legal persons that can be considered as forbidden sources, directly or indirectly and independently of the interests of the institution, which are: receive money or any other improper economic benefit conditional on • persons or institutions whose activities are regulated by or under the the performance of credit, financial or stock exchange transactions. This supervision of the agency where the official is employed; offence was included in a recent amendment to the ACC with the aim of • contractors of the agency or department to which the official belongs; protecting the financial and economic order. and Other acts of commercial bribery, if committed by an agent and harm- • persons or institutions that could be directly affected by actions or ing the principal’s assets, may constitute a form of fraud under the terms of omissions from the agency or department where the public official article 173 [7] ACC. belongs. 29 Penalties and enforcement In its advisory opinions, the OA has denied the possibility of considering What are the sanctions for individuals and companies violating gifts given by forbidden sources as ‘courtesy gifts’, but it has not yet estab- the domestic bribery rules? lished clear and objective criteria regarding gifts and gratuities to public officials. For example, there is no case law discussing value thresholds; the For domestic bribery, the sanction for individuals is imprisonment of one key issue appears to be whether the gift comes from a forbidden source, to six years for the principal offence. Higher penalties, up to 12 years, are regardless of its value. available to punish aggravated offences (in the cases of bribery involving There is no specific provision regulating ‘meals’ or ‘travel’ for gov- judges and prosecutors). ernment officials, but as the concept of ‘gifts’ includes goods, services or Temporary disqualification from holding a public office may also be assets, the Anti-corruption Office has considered ‘meals in restaurants’ imposed for certain types of domestic bribery offences. Further, pursuant and ‘travels’ as an example of ‘services’ that public officials cannot accept to article 22-bis ACC, where a bribery offence is committed ‘with the aim of if they come from forbidden sources. monetary gain’, a fine of up to 90,000 pesos may be imposed in addition to In addition to these provisions, the ACC establishes that it is an offence the prison sentence. Offenders are also subject to confiscation, on convic- for a public official to accept any gift by reason of holding a public office. tion, of the bribe and the proceeds of bribery (article 23 [3] ACC). Whoever gives or offers the gift would also be punished (article 259 ACC). Regarding sanctions applicable to legal persons or in the field of public The applicable sanction is a prison term of between one month and two procurement (see question 15). years, and an absolute disqualification from public office between one and six years (plus a fine up to 90,000 pesos pursuant to article 22-bis ACC, for 30 Facilitating payments cases in which the offence was committed ‘with the aim of monetary gain’). Have the domestic bribery laws been enforced with respect to facilitating or ‘grease’ payments? 27 Gifts and gratuities Are certain types of gifts and gratuities permissible under your Under Argentine legislation, facilitation payments are treated either as bribes or gifts if given to a public official (see question 6). domestic bribery laws and, if so, what types? There are certain exceptions to the general rule prohibiting gifts estab- 31 Recent decisions and investigations lished in Law No. 25,188 and its implementing legislation: Identify and summarise recent landmark decisions and gifts given out of courtesy or diplomatic custom, which should be regis- investigations involving domestic bribery laws, including any tered and incorporated into the state’s heritage only for purposes of health, investigations or decisions involving foreign companies. social welfare, education or cultural–historical heritage (however, no regu- lation has ever implemented this rule, established by article 18 of Law No. MJ Alsogaray case 25,188, therefore there is neither a gifts registry, nor rules or procedures for On 31 May 2004, María Julia Alsogaray, a former public official who had deciding the purposes for which received gifts should be used); conven- served in several cabinet posts during Carlos Menem’s presidency (1989– tional official recognitions from foreign governments, international organ- 1999), was convicted of the crime of illicit enrichment and sentenced to isations or non-profit organisations, as long as said recognition is admitted three years’ imprisonment, six years’ disqualification from public posts, by law, official practice or custom (Executive Decree 41/1999, article 38 and forfeiture of approximately US$700,000 as unjustified wealth. The [a]); travel expenses received from governments, academic institutions or judgment was later confirmed by the National Court of Criminal Cassation, public or private entities relating to conferences, lectures or academic or and, in December 2008, by the National Supreme Court of Justice. cultural activities, as long as there is no conflict with the public official’s responsibilities and unless they are prohibited by specific applicable regu- IBM-Banco Nación case lations (Executive Decree 41/1999, article 38 [b]); and gifts or benefits that In May 2010, former public officials were convicted in the IBM-Banco could not reasonably be considered as intended to influence the will of the Nación case, on the grounds of a settlement agreed by defence and prosecu- public official because of their exiguous value (Executive Decree 41/1999, tion with sentences of up to three years’ imprisonment and the recovery of article 38 [c]). almost 20 million pesos (which, however, have not actually been recovered The last three exceptions, provided for in Executive Decree 41/1999, due to pending proceedings on appeals). The case involved irregularities apply only to public officials and employees within the Executive Branch, during a bidding process related to the computerisation of the Argentine while Law No. 25,188 (the first exception) is applicable to every public offi- National Bank, which was awarded to IBM Argentina. Offers and payment cial or employee of any state power or agency, at all levels. of sums of money to bank managers were found. In relation to ‘small gifts’, in a recent case the Chamber of Appeals stated that in order to ascertain the criminal offence established by arti- Skanska case cle 259 ACC, the gifts should have an economic value, and that a ‘small The case was brought in 2006 and involves an invoicing scheme related gift’ is outside of prohibition (Case 44,429, Jaime, Ricardo y otros s/proc to the construction of pipelines in the northern and southern regions of y embargos, National Chamber of Appeals of the City of Buenos Aires on Argentina. The investigation indicated that over the course of two years Federal Criminal and Correctional Law, 5 October 2010). Although it was the company Skanska had paid over 118 false invoices to at least 23 shell not explicitly stated, a reasonable interpretation of this decision is that only companies. The company later acknowledged the payment of illegal commissions. An injunction of US$4.33 million was applied against the
24 Getting the Deal Through – Anti-Corruption Regulation 2015 Governance Latam · Guillermo Jorge, Fernando Basch & Asociados ARGENTINA
years’ imprisonment and eight years’ disqualification from public posts Update and trends because of a packet of money (amounting to 100,000 pesos) that had been found hidden in her office at the Ministry of Economy in June 2007. In 2014, the Executive sent to Congress a Bill reviewing the Although there was no evidence supporting bribery charges, the tribunal Criminal Code. The Bill, which is expected to enter into force in considered that there was enough evidence to convict the former minis 2015, establishes corporate criminal liability for corruption-related offences. The projected reform also establishes some incentives ter over aggravated concealment and subtraction of public documents. On for introducing anti-bribery compliance programmes. While not an appeal, the Chamber confirmed the conviction, but ordered the Court to absolute defence, well-established compliance practices within a review the penalties. company may result in a substantial reduction of the sanctions. Vice-President indicted A criminal investigation is examining whether Amado Boudou, then company in August 2010. In November 2011, however, the Federal Court Minister of Economy and current Vice-President, used his influence to of Appeals dismissed the charges that the investigating judge had issued reverse the bankruptcy of former Ciccone Calcográfica (now Compañía and acquitted almost all the accused. No relevant decision was made in the de Valores Sudamericana), a currency printing company, allowing it to case thereafter. pass into the hands of his alleged front man, Alejandro Vandenbroele. Mr Boudou has publicly denied any personal relationship with Mr Vandenbroele. In 2014, Mr Boudou was indicted for bribery and conflict of Siemens case interests. His appeal is still pending. The case involved irregularities during a bidding process related to the Argentine ID card project, which was awarded to Siemens IT Services in 1998. The 2008 settlement between siemens AG and the USA and German Ralph Lauren case authorities gave fresh impetus to the Argentine criminal investigation. In After Ralph Lauren signed a non-prosecution agreement with both the October 2014, the Chamber of Appeals of the city of Buenos Aires con- US Securities and Exchange Commission and the Department of Justice firmed the indictment of 11 individuals. The proceedings are still ongoing . in April 2013 over the charges of having paid bribes to Argentine customs officials between 2005 and 2009, an investigation was opened in Argentina, Former President De la Rúa acquitted which is still pending. Former Argentine President Fernando de la Rúa was accused in 2009 of having bought the votes of nine senators for passing an amendment to Former Secretary of Transport convicted the labour legislation. In 2014, the Court concluded that the facts were Former National Transportation Secretary Ricardo Jaime was sentenced ‘fabricated’ and acquitted all the defendants. An appeal by the Prosecutor to six months’ imprisonment in October 2013 for the removal of evidence and the Anticorruption Office is still pending. during a search conducted in the context of a case brought against him for embezzlement. In 2014, Mr Jaime was processed for embezzlement, and Former Minister of Economy convicted the investigation is still ongoing. In December 2012, former Minister of Economy Felisa Miceli, who served the current president during her first term in office, was convicted to four
Fernando Basch [email protected] Guillermo Jorge [email protected]
La Pampa 1534 Tel: +54 11 4788 6649 / +54 11 4896 1627 3rd floor, apartment A www.governancelatam.com.ar Buenos Aires C1428DZF Argentina
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Australia
Jane Ellis and Brigid Trevaskis Assertia Pty Ltd
1 International anti-corruption conventions a person with the intention of influencing a Commonwealth public official To which international anti-corruption conventions is your in the exercise of the official’s duties as a Commonwealth public official or if the receipt, or expectation of the receipt, of the benefit would tend to country a signatory? influence a public official in the exercise of their duties as a public official. Australia is a signatory to: To be guilty of this offence, it is not necessary that the defendant knew • the OECD Convention on Combating Bribery of Foreign Public that the official was a Commonwealth public official or that the duties were Officials in International Business Transactions (OECD Convention), those of a Commonwealth public official. signed in 1997 and ratified in 1999; A Commonwealth public official is guilty of an offence if he or she • the United Nations Convention against Corruption, signed in 2003 dishonestly asks for, receives or obtains or agrees to receive or obtain, a and ratified in 2005 (UNCAC); and bribe or corrupting benefit for himself, herself or for another person if the • the United Nations Convention against Transnational Organized official does so with the intention that the exercise of their official duties Crime, signed in 2000 and ratified in 2004. will be influenced or where the receipt, or expectation of the receipt, of the benefit would tend to influence that Commonwealth public official in the Australia contributed to the development of the G20 2015–2016 Anti- exercise of their official duties (sections 141.1(3) and 142.1(3)). Corruption Action Plan (endorsed in November 2014) and is an active A Commonwealth public official is also guilty of an offence if he or member of the G20 Anti-Corruption Working Group. Australia was the she uses his or her office, or any information gained by virtue of his or her president of the G20 in 2014. In addition, Australia has endorsed the office, with the intention of dishonestly obtaining a benefit for himself, Asian Development Bank and the OECD Anti-Corruption Action Plan herself or for another person or with the intention of dishonestly causing a for the Asia-Pacific region, and is also an active contributor to the Asia- detriment to another person (section 142.2). Pacific Economic Cooperation (APEC) Anti-Corruption and Transparency Offences for improperly dealing with public money are contained in Experts Task Force. the Public Governance, Performance and Accountability Act 2013 (Cth). Australia operates on a federal and state legal system. Separate state 2 Foreign and domestic bribery laws and territory criminal legislation as well as specific-purpose legislation prohibits bribery of domestic public officials employed by an Australian Identify and describe your national laws and regulations state or territory. It is always recommended to seek advice on local state prohibiting bribery of foreign public officials (foreign bribery or territory laws as well as Commonwealth laws. laws) and domestic public officials (domestic bribery laws).
Foreign bribery laws Foreign bribery In December 1999, Australia incorporated the OECD Convention require- 3 Legal framework ments in the Criminal Code Act 1995 (Cth) (Criminal Code) by introduc- ing a new division 70, ‘Bribery of foreign public officials’. It is the only Describe the elements of the law prohibiting bribery of a Australian law that addresses foreign bribery. foreign public official. Section 70.2 provides that a person is guilty of an offence if that person A person is guilty of an offence of bribing a foreign public official under gives or offers a benefit or causes a benefit to be given or offered to another section 70.2 of the Criminal Code if: person and the benefit is not legitimately due, and giving or offering the • the person: benefit is intended to influence a foreign public official in the exercise of • provides a benefit to another person; or their official duties in order to obtain or retain business or obtain or retain a • causes a benefit to be provided to another person; or business advantage that is not legitimately due to the recipient, or intended • offers to provide, or promises to provide, a benefit to another recipient. person; or A person is not guilty of an offence against section 70.2 if he or she • causes an offer of the provision of a benefit, or a promise of the can prove that his or her conduct occurred wholly in that country or place provision of a benefit, to be made to another person; and where the headquarters of the organisation is located and that conduct is • the benefit is not legitimately due to the other person; and lawful or required by the law in that place (section 70.3), or that the benefit • the first-mentioned person does so with the intention of influencing a is a ‘facilitation’ payment (section 70.4). foreign public official in the exercise of the official’s duties as a foreign A person commits an offence against section 70.2 if the conduct occurs public official in order to: wholly or partly in Australia, or on an Australian ship or aircraft; or outside • obtain or retain business; or Australia, and at the time of the alleged offence, the person is an Australian • obtain or retain a business advantage that is not legitimately due citizen, an Australian resident or a body corporate incorporated by or to the recipient, or intended recipient, of the business advantage. under a law of the Commonwealth or of an Australian State or Territory (section 70.5). A benefit includes any advantage and is not limited to property. A business advantage means an advantage in the conduct of business. Domestic bribery laws It is not necessary to prove that business, or a business advantage, was The principal national law prohibiting the bribery of domestic public offi- actually obtained or retained. cials is set out in divisions 141 and 142 of the Criminal Code. Duty, in relation to a foreign public official, means any authority, duty, Divisions 141 and 142 of the Criminal Code make it an offence for a function or power that is conferred on the official; or that the official person or body corporate to give or offer a bribe or a ‘corrupting benefit’ to holds himself or herself out as having.
26 Getting the Deal Through – Anti-Corruption Regulation 2015 Assertia Pty Ltd AUSTRALIA
In determining what is not legitimately due to a person, the court must punishable accordingly (section 11.2 of the Criminal Code.) This will be the disregard the fact that the business advantage may be a local or industry case even if the principal offender has not been prosecuted or found guilty custom, the value of the benefit or business advantage and any official (section 11.2(5)). tolerance of the benefit or business advantage. Further, an intermediary or third party will be guilty if he or she had Section 70.2 of the Criminal Code is breached: intended that: • if the conduct occurs wholly or partly in Australia, or on an Australian • his or her conduct would aid, abet, counsel or procure the commission ship or aircraft; or of any offence (including its fault elements) of the type the principal • outside Australia, if the person engaging in the conduct is an Australian offender committed; or citizen, an Australian resident, or a body corporate incorporated by or • his or her conduct would aid, abet, counsel or procure the commission under a law of the Commonwealth or an Australian state or territory. of an offence and was reckless about the commission of the offence (including its fault elements) that the principal offender in fact com- 4 Definition of a foreign public official mitted (section 11.2(2)). How does your law define a foreign public official? The definition of foreign public officials includes authorised intermediar- Section 70.1 of the Criminal Code defines a foreign public official as: ies (see question 4). See also question 8. • an employee or official of a foreign government body or an individual who performs work for a foreign government body under a contract; 8 Individual and corporate liability • an individual who holds or performs the duties of an appointment, Can both individuals and companies be held liable for bribery office or position under a law, by custom or convention, of a foreign of a foreign official? country or of part of a foreign country; • an individual who is otherwise in the service of a foreign government The Criminal Code applies to the conduct of individuals and corporations. body (including service as a member of a military force or police The Criminal Code attributes the physical element of an employee, agent force); or officer of a body corporate acting within the actual or apparent scope of • a member of the executive, judiciary or magistracy of a foreign coun- his or her employment or within his or her actual or apparent authority to try or of part of a foreign country; the body corporate (section 12.2). • an employee of a public international organisation, an individual who A body corporate will be deemed to have intended to commit an act performs work for a public international organisation under a contract, where it has expressly, tacitly or impliedly authorised or permitted the an individual who holds or performs the duties of an office or position contravening conduct (section 12.3). in a public international organisation or an individual who is otherwise The means by which such an authorisation or permission may be in the service of a public international organisation; established include proving that: • a member or officer of the legislature of a foreign country or of part of • the body corporate’s board of directors intentionally, knowingly or a foreign country; or recklessly carried out the relevant conduct, or expressly, tacitly or • an individual who is an authorised intermediary, or holds him or her- impliedly authorised or permitted the commission of the offence; self out to be the authorised intermediary of a foreign public official • a high managerial agent of the body corporate intentionally, know- covered by any of the above. ingly or recklessly engaged in the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the 5 Travel and entertainment restrictions offence; To what extent do your anti-bribery laws restrict providing • a corporate culture existed within the body corporate that directed, foreign officials with gifts, travel expenses, meals or encouraged, tolerated or led to non-compliance with the relevant pro- vision of the Criminal Code; or entertainment? • the body corporate failed to create and maintain a corporate culture The definition of ‘benefit’ in the Criminal Code includes any advantage that required compliance with the relevant provision of the Criminal and is not limited to property (section 70.1). This means that the prohi- Code. bition against bribery of foreign public officials under division 70 of the Criminal Code can apply to the provision of gifts, travel expenses, meals, If the offender is a corporation, an imprisonment term is converted to a entertainment and any other advantage to a foreign public official, unless pecuniary penalty (section 4B of the Crimes Act 1914 (Cth) and section 12.1 the person giving the advantage can demonstrate that his or her conduct is Criminal Code). required or lawful in the foreign public official’s country (section 70.3) or that it is a ‘facilitation’ payment (section 70.4). 9 Civil and criminal enforcement Is there civil and criminal enforcement of your country’s 6 Facilitating payments foreign bribery laws? Do the laws and regulations permit facilitating or ‘grease’ Criminal enforcement of Australia’s foreign bribery laws pursuant to the payments? Criminal Code was exercised for the first time in 2011 against two compa- Section 70.4 of the Criminal Code permits ‘facilitation’ payments provided nies and nine individuals. Investigations into other allegations of breaches that the value of the benefit is minor, the conduct is for the sole or domi- of the laws have been and are being conducted. See also question 16. nant purpose of expediting or securing a routine government action (as The Criminal Code does not provide for any civil enforcement of defined) and as soon as practicable after the conduct, a record of the con- Australia’s foreign bribery laws. However, persons who believe they have duct is made in accordance with section 70.4. The Criminal Code imposes suffered damage through an individual or company breaching foreign no specified monetary or financial limit on facilitation payments. bribery laws can take civil action against that individual or company under In November 2011, the Commonwealth government released a con- common law. Civil action brought by any such person can occur instead sultation paper seeking comment on its proposal to remove facilitation of, or in conjunction with, any criminal enforcement commenced by the payments as a defence to the prohibition on paying bribes. The consulta- Commonwealth Director of Public Prosecutions (DPP). tion closed in December 2011, although late submissions were accepted until February 2012. The Commonwealth government is still considering 10 Agency enforcement its next steps but it seems to have lost its appetite to make this change. What government agencies enforce the foreign bribery laws and regulations? 7 Payments through intermediaries or third parties In what circumstances do the laws prohibit payments through Investigation of a suspected contravention of section 70.2 of the Criminal Code is the responsibility of the Australian Federal Police (AFP) and intermediaries or third parties to foreign public officials? prosecution of the offence is the responsibility of the DPP. Prosecutions A person who aids, abets, counsels or procures the commission of an are conducted in accordance with the Commonwealth government’s offence by another person is taken to have committed that offence and is ‘Prosecution Policy of the Commonwealth: Guidelines for the making of www.gettingthedealthrough.com 27 AUSTRALIA Assertia Pty Ltd decisions in the prosecution process’ (Prosecution Policy). The Prosecution attributable to the contravening conduct (whichever is greater). If the value Policy states that when deciding whether to prosecute a person for bribing cannot be ascertained, the corporation is liable for a maximum penalty of a foreign public official under division 70 of the Criminal Code, the pros- A$17 million or 10 per cent of the annual turnover of the body corporate in ecutor must not be influenced by: the 12 months prior to the contravening conduct being committed (which- • considerations of national economic interest; ever is greater). • the potential effect upon relations with another state; or Proceeds of foreign bribery can be forfeited to the Australian govern- • the identity of the natural or legal persons involved. ment under the Proceeds of Crime Act 2002 (Cth).
The Australian Securities and Investments Commission (ASIC) also has 16 Recent decisions and investigations a general power under its enabling legislation, the Australian Securities Identify and summarise recent landmark decisions or and Investments Commission Act 2001 (Cth), to conduct investigations investigations involving foreign bribery. as it thinks expedient for the administration of the corporations legisla- tion where it has a reason to suspect that a contravention of an Australian The effectiveness and efficacy of Australian laws prohibiting bribery of Commonwealth, state or territory law concerning the management or foreign officials have yet to be fully tested. The first prosecutions were affairs of a company or a contravention that involves fraud or dishonesty brought under Australia’s Criminal Code in 2011. Securency International relating to a company has been committed. Pty Ltd (Securency), in which the Reserve Bank of Australia (RBA) has a 50 per cent interest, and Note Printing Australia Limited (NPA), a wholly 11 Leniency owned subsidiary of the RBA, and nine former executives and sales agents Is there a mechanism for companies to disclose violations in were prosecuted for breaching the prohibition against bribing foreign pub- lic officials. exchange for lesser penalties? In 2010, allegations surfaced that Securency and NPA had provided Prosecutions are conducted in accordance with the Prosecution Policy. The funds to overseas agents in order for them to bribe foreign public officials DPP can offer concessions to an accomplice to a crime who is prepared to to secure lucrative contracts to produce polymer bank notes in up to six provide evidence. Concessions can be as to the choice of charge, the grant countries, including Malaysia, Nigeria and Vietnam. An RBA audit in 2010 of immunity from prosecution or by means of an undertaking under sec- of Securency’s activities revealed that almost A$50 million had been paid tions 9(6) and 9(6D) of the Director of Public Prosecutions Act 1983 (Cth). between 2003 and 2009 to overseas agents. Section 16A (2) of the Crimes Act 1914 (Cth) allows a court imposing a The AFP commenced investigations in 2009 in cooperation with other sentence to reduce that sentence where the offender has cooperated with national enforcement agencies including Britain’s Serious Fraud Office law enforcement agencies. (SFO) and Malaysia’s Anti-Corruption Commission. Securency and NPA pleaded guilty to the charges in November 2011 12 Dispute resolution and were fined a total of A$21 million. One former executive of Securency Can enforcement matters be resolved through plea received a suspended sentence of six months’ imprisonment in August 2012 for pleading guilty to false accounting. At the time of writing, agreements, settlement agreements, prosecutorial discretion Australian authorities were also seeking the extradition of an Indonesian or similar means without a trial? intermediary hired by the RBA, who is in custody in Singapore. A series The Prosecution Policy does not provide for resolution of enforcement of court orders has otherwise restricted access to information about the matters through any of these processes but does provide for charge nego- proceedings before the court. tiations. This allows parties to plead guilty to fewer charges than what they Between October 2011 and February 2012 Bruce Allan Hall, who was may otherwise face if the prosecution proceeds. formerly chief executive of Aluminium Bahrain BSC (Alba), was arrested in Newcastle, Australia, on the application of the SFO and extradited to face 13 Patterns in enforcement charges in the United Kingdom. The SFO alleges that Mr Hall conspired with others to make corrupt payments, receive bribes and launder money Describe any recent shifts in the patterns of enforcement of the while he was the chief executive of Alba. In June 2012, Mr Hall pleaded foreign bribery rules. guilty to a charge of conspiracy to corrupt and gave evidence against other Increased media scrutiny and recent reviews of its international compliance individuals. In July 2014, Mr Hall was sentenced to 16 months in prison. obligations (see ‘Update and trends’) has encouraged the Commonwealth The investigation into these allegations has involved the AFP, the SFO, the government to take a more active role in combating corruption, particu- US Department of Justice and the FBI, among others. larly domestically. See question 16 and ‘Update and trends’. In February 2012, the AFP commenced investigations into allegations that Leighton Holdings, an Australian company, paid bribes to secure 14 Prosecution of foreign companies lucrative contracts in Iraq. More recently, in October 2013, media reports revealed that Leighton’s top executives and directors allegedly oversaw In what circumstances can foreign companies be prosecuted plans to pay multimillion-dollar bribes to win contracts overseas. In late for foreign bribery? November 2013, ASIC announced that it was investigating these allega- To be prosecuted under the foreign bribery provisions in the Criminal tions, in addition to working alongside the AFP in its investigation. These Code, a company must be incorporated under a law of the Commonwealth enquiries are ongoing. Both the AFP and ASIC have been subject to signifi- or of an Australian state or territory. This provision means that a foreign cant media criticism for the apparent failures and delays in the handling of company’s Australian-incorporated subsidiaries can be prosecuted under this case. the Criminal Code. In March 2012, it was reported that Tenix Defence, an Australian sub- However, a person commits an offence under section 70.2 if, among sidiary of defence firm BAE Systems, was under investigation by the AFP other things, the alleged offence occurs wholly or partly in Australia or on for allegedly paying bribes to win contracts in several foreign countries. board an Australian aircraft or ship (section 70.5). Thus, if a foreign com- The AFP is currently investigating up to five deals by the Australian firm. pany bribes a foreign public official (as defined) in Australia, the foreign No further updates on these investigations have been provided. company can be prosecuted in Australia. In January 2013, following recommendations made in the OECD’s Phase 3 Report on Australia’s implementation of the OECD Convention 15 Sanctions (see ‘Update and trends’), the AFP announced that it was reopening inves- tigations which it had previously closed into the Australian companies, Oz What are the sanctions for individuals and companies violating Minerals and Cochlear, regarding alleged bribery of foreign public offi- the foreign bribery rules? cials. Cochlear has since said the AFP has advised Cochlear that the AFP Under the Criminal Code (section 70.2), the penalty for an individual who had completed its investigation and would be taking no further action. Oz bribes a foreign public official is imprisonment for up to 10 years or a fine Minerals has said that it undertook the transaction being investigated in a of up to A$1.7 million, or both. If a body corporate breaches the provision ‘normal commercial and appropriate manner’. The AFP also announced and the value of the benefit can be ascertained, the corporation is liable that it had reopened its investigation into bribery allegations relating to for a maximum fine of A$17 million or three times the value of the benefit BHP Billiton, an Australian resource company, sponsorship of the Beijing
28 Getting the Deal Through – Anti-Corruption Regulation 2015 Assertia Pty Ltd AUSTRALIA
Olympics. BHP Billiton has said it is cooperating with the relevant authori- money-laundering activity. If strictly enforced, these additional reporting ties. The Oz Minerals and BHP Billiton investigations remain ongoing. and disclosure obligations will make it more difficult for the proceeds of Prior to these investigations and prosecutions, the Cole Inquiry (an corruption to be paid and held. inquiry into whether the actions of the Australian Wheat Board (AWB) A number of statutes and other instruments, for example, Australia’s and its agreements with the Iraqi government breached Australian law) tax laws and the CGPRs, require that companies have identification, had been the most significant matter relating to violations of Australian escalation and management of risk procedures in place. The CGPRs also laws prohibiting bribery of foreign officials. While no criminal prosecu- require disclosure of issues that may or do have an effect on the govern- tions have resulted, civil proceedings have been brought by ASIC against ance of the company in that company’s annual report. The continuous dis- six individuals involved in the AWB actions. Two former directors of AWB closure obligations in the ASX Listing Rules (applicable to entities listed – Andrew Lindberg, the former managing director, and Paul Ingleby, the on the ASX) require entities to disclose information to the ASX once an former chief financial officer – were found to have breached their fiduci- entity is or becomes aware of any information concerning the entity that ary duties in contravention of the Australian Corporations Act 2001 (Cth) a reasonable person would expect to have a material effect on the price or (Corporations Act) and were each disqualified from managing corpora- value of the entity’s securities. tions for a specified period and to pay a pecuniary penalty. Proceedings against Trevor Flugge, the former chairman of AWB, and Peter Geary, the 19 Prosecution under financial record keeping legislation former group general manager trading of AWB, have been listed for hear- Are such laws used to prosecute domestic or foreign bribery? ing in October 2015. Proceedings against Charles Stott and Michael Long, both former general managers of international sales and marketing for Prosecutions relating to domestic or foreign bribery can be made under AWB, were discontinued in December 2013. federal or state legislation in respect of any failure to maintain and appro- priately audit financial records, fraudulent or dishonest record keeping and Financial record keeping tax evasion. However, there have only been limited prosecutions to date, with one former executive of Securency receiving a suspended sentence 17 Laws and regulations of six months’ imprisonment in August 2012 for pleading guilty to false What legal rules require accurate corporate books and records, accounting in breach of domestic bribery legislation in Victoria (see ques- effective internal company controls, periodic financial tion 16). statements or external auditing? 20 Sanctions for accounting violations The Corporations Act 2001 (Cth) is the main Australian statute that requires the keeping of accurate corporate books and records, implemen- What are the sanctions for violations of the accounting rules tation and maintenance of effective internal company controls, compil- associated with the payment of bribes? ing of periodic financial statements and external auditing of a company’s Penalties (both criminal and civil) for violations of financial record keep- financial statements. ing and related obligations are lengthy and detailed. In brief, they include Other statutes, regulations and instruments (some with statutory pecuniary penalties, imprisonment and disqualification from office. effect) that also require a company to comply with some or all of these obligations, or which provide guidance as to how companies are expected 21 Tax-deductibility of domestic or foreign bribes to comply with these obligations include the Income Tax Assessment Act 1936 (Cth), the Taxation Administration Act 1953 (Cth), the Accounting Do your country’s tax laws prohibit the deductibility of Standards and Auditing Standards issued by the Australian Accounting domestic or foreign bribes? Standards Board and the Auditing and Assurance Standards Board, the Australia’s tax laws prohibit the deductibility of domestic or foreign Listing Rules of the Australian Securities Exchange (ASX) and the ASX bribes (sections 26-52 and 26-53, Income Tax Assessment Act 1997 (Cth)). Corporate Governance Principles and Recommendations (CGPR). Other However, ‘facilitation’ payments are not regarded as bribes and may be sources of similar obligations include: tax-deductible provided certain prescribed requirements are met. • federal and state legislation governing Commonwealth, state and ter- ritory-owned corporations or enterprises; Domestic bribery • the specific enabling legislation and regulations of other types of Commonwealth, state and territory bodies; and 22 Legal framework • various Australian state and territory legislation which allows for the Describe the individual elements of the law prohibiting bribery incorporation of associations. of a domestic public official.
18 Disclosure of violations or irregularities A person is guilty of an offence under section 141.1(1) of the Criminal Code if the person dishonestly: To what extent must companies disclose violations of anti- • provides a benefit to another person; bribery laws or associated accounting irregularities? • causes a benefit to be provided to another person; The Criminal Code does not oblige parties to self-report to the AFP con- • offers to provide, or promises to provide, a benefit to another person; duct that could potentially constitute a contravention of the anti-bribery or provisions of the Criminal Code. However, if: • causes an offer of the provision of a benefit, or a promise of the provi- • a party (Party A) is aware that another party (Party B) is engaging in sion of a benefit, to be made to another person; conduct that may constitute a contravention of the Criminal Code; and the person does so with the intention of influencing an Australian and Commonwealth public official in the exercise of the official’s duties as • Party A explicitly or implicitly does nothing to ensure such conduct a Commonwealth public official. ceases, Section 141.1(3) of the Criminal Code provides that a Commonwealth then there is a risk that Party A may be considered to have contributed to public official is guilty of an offence if he or she dishonestly: the continuation of, or be complicit in, the conduct. Neither the AFP nor • asks for a benefit for himself, herself or another person; the DPP have issued any guidance to corporates or individuals as to how • receives or obtains a benefit for himself, herself or another person; or they might self-report, should they choose to do so. • agrees to receive or obtain a benefit for himself, herself or another Australian financial record keeping legislation requires that compa- person, nies maintain accurate accounting and other records. This means that reimbursements or payments made to a company’s foreign agent must be And, in addition to the above, the official does so with the intention: adequately and accurately explained and accounted for in the company’s • that the exercise of the official’s duties as a Commonwealth public financial records. If a company’s auditors identify an accounting irregular- official will be influenced; or ity, the auditor is obliged to report the matter to the company’s board. • of inducing, fostering or sustaining a belief that the exercise of the The Anti-Money Laundering and Counter-Terrorism Financing Act official’s duties as a Commonwealth public official will be influenced. 2006 (Cth) contains several key provisions on the reporting of suspicious www.gettingthedealthrough.com 29 AUSTRALIA Assertia Pty Ltd
Section 142 prohibits the giving of a ‘corrupting benefit’ with the intention these (or similar) prohibitions generally apply to both the provision and of influencing an Australian Commonwealth public official in the exercise receipt of benefits (pecuniary or otherwise). of the official’s duties as a Commonwealth public official. In certain circumstances, government or agency policies may permit Similar elements exist in most Australian state and territory laws pro- the receipt of benefits by domestic officials, subject to compliance with hibiting bribery of a domestic public official. For example, see the Crimes certain obligations. These include: Act 1900 (NSW), the Independent Commission Against Corruption Act • that the benefit is of a minor value (this is not defined, but usual 1988 (NSW), the Crimes Act 1958 (Vic), the Criminal Code Act 1899 (Qld) practice dictates that the benefit must not have a value of more than and the Crime and Corruption Act 2001 (Qld). A$100); • the benefit is made in connection with an existing business relation- 23 Prohibitions ship (for instance, an executive manager of a company pays for a pub- Does the law prohibit both the paying and receiving of a bribe? lic official’s meal when they meet to discuss a current project) or it is a token or ceremonial gift (for example, where a public official has been All Commonwealth and Australian state and territory jurisdictions prohibit invited to give a presentation at a function organised by a company, the giving of a bribe to a public official, as well as receipt or acceptance of and the public official is presented with flowers or a bottle of wine); a bribe by a public official. Public officials are also prohibited from solicit- and ing bribes or inappropriately using their office to obtain a benefit for them- • the public official reports any benefit given to, or accepted by, him or selves or for others. her to an officer of his or her company or agency (the report must iden- tify the giver; detail where, when and how the benefit was offered or 24 Public officials given; and estimate the value of the benefit). How does your law define a public official and does that 27 Gifts and gratuities definition include employees of state-owned or state- controlled companies? Are certain types of gifts and gratuities permissible under your domestic bribery laws and, if so, what types? The Criminal Code defines Commonwealth public official broadly and includes members of parliament, the judiciary, public service employ- No Australian state or territory exempts particular types of gifts or gratui- ees, members of the AFP and the defence force. It is arguable that, as ties from its anti-corruption provisions. However, some gifts may fall below the definition extends to an individual employed by the Commonwealth the threshold of criminal conduct. The threshold for criminal corruption in (otherwise than under the Public Service Act 1999 (Cth)), employees of all Australian states and territories is the point at which a gift may influence Commonwealth government-owned companies could be covered by the an official in the performance of his or her official duties. The acceptance of Criminal Code. such a gift by a public official is often regulated by departmental or agency Some Australian state and territory anti-corruption laws distinguish policies. These policies often permit acceptance of small ceremonial or between public officials administering justice and other public officials. token gifts and small gifts of gratitude, but specify strict limits on the value For example, the Criminal Code Act Compilation Act 1913 (WA) speci- of acceptable gifts. Expensive gifts are usually required to be delivered over fies harsher penalties for corruption relating to state judicial officers and to the official’s department. Many departments and agencies are required non-judicial officers involved in the administration of justice, than for to maintain registers of the gifts their officials have been offered or those other state public officials. Queensland’s Criminal Code Act 1899 (Qld), gifts that have been accepted. Tasmania’s Criminal Code Act 1924 (Tas), and the Northern Territory’s Criminal Code Act (NT) are similar. In these states and territories, offences 28 Private commercial bribery relating to judicial corruption cannot be prosecuted without the consent of Does your country also prohibit private commercial bribery? a senior law officer (for example, the state or territory’s attorney general). Additionally, in Queensland, offences relating to ministers of the Crown The Criminal Code only applies to conduct directed at or involving public are also subject to tougher penalties. officials. Private commercial bribery is regulated indirectly through direc- tors’, employees’ or officers’ duties in the Corporations Act, or market 25 Public official participation in commercial activities sharing or price-fixing provisions in the Competition and Consumer Act 2010 (Cth). Can a public official participate in commercial activities while At the state and territory level, some jurisdictions prohibit corrupting serving as a public official? payments in both the public and private sectors. For example, section 249B Public officials may participate in commercial activities while serving as of the Crimes Act 1900 (NSW) and Chapter 42A of the Criminal Code Act a public official. However, there are some prohibitions and restrictions, 1899 (Qld) prohibit an agent from corruptly receiving or soliciting from including prohibitions on participation in commercial activities that are another person a benefit in relation to the business or affairs of the agent’s inappropriate for a public official; for example, where a conflict of interest principal. is likely to result or where there is a perception (actual or potential) that the commercial activity may compromise their objectivity or independence. 29 Penalties and enforcement Such prohibitions or restrictions are usually set out in the relevant What are the sanctions for individuals and companies violating Commonwealth and Australian state or territory public service employment the domestic bribery rules? legislation, an organisation’s enabling legislation, whole-of-government (both federal and state) policies and agency- specific codes of conduct. The penalties will vary depending on the law that has been violated, and Irrespective of whether participation by a public official in commercial in some cases, who has committed the offence. Under the Commonwealth activities is prohibited or restricted, public officials have a positive obliga- Criminal Code, the maximum penalty for an individual is 10 years’ impris- tion to declare any personal interest if, among other things, a public official onment or a maximum fine of A$1.7 million, or both, under section 141 holds a decision-making or influential role within a government agency and a maximum of five years’ imprisonment under section 142. If a body (for example, a local council officer responsible for awarding large-scale corporate breaches section 141, and the value of the benefit can be ascer- development contracts). tained, the corporation is liable for a maximum fine of A$17 million or three times the value of the benefit attributable to the contravening conduct 26 Travel and entertainment (whichever is greater). If the value of the benefit cannot be ascertained, the corporation is liable for a maximum penalty of A$17 million or 10 per cent Describe any restrictions on providing domestic officials of the annual turnover of the body corporate in the 12 months prior to the with gifts, travel expenses, meals or entertainment. Do the contravening conduct being committed (whichever is greater). restrictions apply to both the providing and receiving of Under various Australian state and territory laws, penalties can range such benefits? from three years to 21 years’ imprisonment for individuals. Some jurisdic- In the main, providing domestic officials with gifts, travel expenses, meals tions specifically impose fines on companies in place of imprisonment, or entertainment is prohibited by legislation and by government or agency whereas others make no specific provision for companies. policy documents such as codes of conduct. The various laws imposing
30 Getting the Deal Through – Anti-Corruption Regulation 2015 Assertia Pty Ltd AUSTRALIA
Workers Union of Australia. The Commissioner’s Interim Report was Update and trends tabled in Parliament on 19 December 2014 with the final report due to be tabled by 31 December 2015. The Interim Report made findings referring a Under Australia’s leadership, the G20 agreed in 2014 a set of number of individuals to various state prosecuting authorities to consider principles for governments that aims to make it easier to identify whether criminal offences have been committed. the beneficial owner of shell companies to tackle secrecy behind corruption, tax evasion and money laundering. Australia will be obliged to implement its obligations under this agreement. New South Wales (NSW) The Australian government has been on the verge of During 2014, the NSW ICAC conducted a series of investigations into introducing a National Anti-Corruption Plan since 2013. According allegations of corruption by various state politicians and public servants to some sources, the Plan will be introduced in 2015. Depending on (http://icac.nsw.gov.au/investigations). Summaries of the most significant the content of the Plan, its implementation could have significant ones are as follows. implications for various Commonwealth authorities, agencies and The NSW ICAC is conducting an investigation into allegations that Australia’s foreign anti-bribery law. various members of parliament (MP) from the Central Coast of NSW solic- Some sources suggest that Australia is likely to increase enforcement of its foreign anti-bribery law in 2015. However, to ited illegal donations in return for favours. Funds were paid to MPs through date there continue to be limited enforcement actions taken against a sham company as well as directly as cash in envelopes. To date 11 Liberal foreign companies or for foreign bribery. politicians have resigned, stepped down or moved to the crossbenches as a Domestically, the Commission of Inquiry into Trade Union result of the NSW ICAC corruption investigation. Most memorably, Liberal Governance and Corruption, the activity undertaken by the NSW Premier, Barry O’Farrell, stepped down in April 2014 having sworn on oath ICAC and increased scrutiny by the media indicate that there has that he had never received an expensive bottle of wine only to have his been increased enforcement of and interest in the enforcement of testimony refuted by his own handwritten thank-you note. Mr O’Farrell domestic bribery laws. was not and is not being investigated for corruption. In July 2014, the NSW ICAC issued its final report relating to further allegations against, among others, the former MP, the Hon Edward Obeid 30 Facilitating payments MLC. The findings are in addition to reports issued in July and August 2013 (see below) and include that between 2000 and 2011: Have the domestic bribery laws been enforced with respect to • Mr Obeid misused his position as an MP to attempt to influence other facilitating or ‘grease’ payments? public officials to exercise their official functions with respect to retail There are no reports of prosecutions being brought against individuals in leases at Circular Quay, located near architectural icons the Sydney respect of any facilitation payments. Public and media interest, and the Opera House and the Sydney Harbour Bridge, without disclosing that reporting of cases, tend to focus on allegations of bribery and corruption. he, his family or a related entity had an interest in some of those leases. • certain public officials improperly exercised their official functions, 31 Recent decisions and investigations with respect to the Circular Quay leases, to benefit Mr Obeid or his family. Identify and summarise recent landmark decisions and investigations involving domestic bribery laws, including any The NSW ICAC referred the matter to the DPP. The DPP has since advised investigations or decisions involving foreign companies. that there is sufficient evidence to prosecute and the matter is currently There are no decisions involving foreign companies and no informa- before the courts. tion available as to whether there are any investigations being conducted ICAC found that between 2007 and 2008, Mr Obeid misused his into foreign companies. However, allegations of domestic corruption are position as an MP to influence other public officials to exercise their- offi being investigated. Of these, the NSW Independent Commission Against cial functions with respect to the review and grant of water licences at Corruption (NSW ICAC) has been the most active. Cherrydale Park, without disclosing that he, his family or a related entity had an interest in the licences. ICAC has made findings of corrupt conduct Commonwealth against Mr Obeid and referred the matter to the DPP (including asking for In February 2014, the Australian Prime Minister Tony Abbott announced the advice on whether to prosecute for misconduct in public office). It is also formation of a Royal Commission of Inquiry into Trade Union Governance alleged that during the same period, certain public officials improperly and Corruption. A former High Court of Australia justice, the Honourable exercised their official functions with respect to the review and grant of the Dyson Heydon AC QC, has been appointed as the sole Commissioner. water licences at Cherrydale Park. The Commission is to inquire into alleged financial irregularities associ- Following earlier NSW ICAC reports criminal charges have now been ated with trade unions including: the Australians Workers Union; the filed against Edward Obeid and Ian Macdonald over the alleged misuse of Construction Forestry Mining and Energy Union; the Communications, confidential information and inducements surrounding the former min- Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied isters’ decisions to open mining areas and award exploration licences in Services Union of Australia; the Health Services Union; and the Transport NSW. These allegations remain before the courts. Further prosecution
Jane Ellis [email protected] Brigid Trevaskis [email protected]
50 High Holborn Street Tel: +61 401 586 561 Surry Hills [email protected] NSW 2010 www.assertia.com.au Australia
www.gettingthedealthrough.com 31 AUSTRALIA Assertia Pty Ltd decisions relating to other individuals are awaited. Criminal charges have Some of the WA CCC’s earlier investigations resulted in significant indi- also been filed against Mr Macdonald for corruptly receiving a benefit, and viduals being prosecuted but also criticised for failing to secure sufficient against businessman, Mr Ronald Medich, for corruptly offering a benefit. evidence to support its findings. The charges relate to a NSW ICAC finding that Mr Medich offered induce- Tasmania’s Integrity Commission (IC) was established in 2011. It ments to Mr Macdonald to facilitate meetings between Mr Medich and investigates and makes findings into various allegations of corruption by state energy executives. public officials (www.integrity.tas.gov.au/home). The IC’s investigations to date have not resulted in individuals of significance being prosecuted. Other jurisdictions Victoria’s Independent Broad-based Anti-corruption Commission Queensland’s Crime and Corruption Commission (Qld CCC) was estab- (IBAC) was established in 2013. It investigates and makes findings into lished in 2001 (under the name Crime and Misconduct Commission). It various allegations of corruption by public officials (www.ibac.vic.gov.au/). investigates and makes findings into various allegations of corruption by The IBAC’s investigations to date have not resulted in individuals of signifi- public officials (www.ccc.qld.gov.au/). Some of the Qld CCC’s earlier cance being prosecuted. investigations resulted in significant individuals being prosecuted. For South Australia’s Independent Commission Against Corruption (SA example, a former minister for industrial relations and health was sen- ICAC) also was established in 2013. It investigates and makes findings into tenced to five years’ imprisonment for awarding government contracts in various allegations of corruption by public officials (www.icac.sa.gov.au/). exchange for payments. However, in 2014 the Queensland government The SA ICAC’s investigations to date have not resulted in individuals of weakened the CCC’s investigative powers. significance being prosecuted. Western Australia’s Corruption and Crime Commission (WA CCC) Neither the Australian Capital Territory nor the Northern Territory has was established in 2004. It investigates and makes findings into various an anti-corruption investigative agency. allegations of corruption by public officials (https://www.ccc.wa.gov.au/).
32 Getting the Deal Through – Anti-Corruption Regulation 2015 Sedgwick Chudleigh Ltd BERMUDA
Bermuda
Alex Potts and Chen Foley Sedgwick Chudleigh Ltd
1 International anti-corruption conventions Separately, some local politicians in Bermuda have called for the To which international anti-corruption conventions is your introduction of a local Anti-Corruption Commission, and they have gone so far as to prepare and publish draft legislation, although this has not yet country a signatory? been endorsed by the Bermuda government or enacted by Bermuda’s Bermuda is a self-governing British overseas territory, whose legal system parliament. is based on the English legal system. As such, the common law, the doc- Although not an anti-corruption convention, the Vienna Convention trines of equity and the acts of Parliament of England of general applica- against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988 tion, which were in force in England at the date when Bermuda was first was extended to Bermuda in February 1995. settled on 11 July 1612, have the force of law in Bermuda, subject to: The Criminal Justice (International Co-Operation) (Bermuda) Act any local Bermuda legislation enacted since 1612; 1994 gives effect to the Vienna Convention in Bermuda, and it enables • any UK legislation enacted and expressly extended and applied to Bermuda’s government and courts to cooperate by way of mutual legal Bermuda since 1612; and assistance with other countries in criminal proceedings and investigations, • any legal precedent established by the case law emanating from by empowering, for example, Bermuda’s Attorney-General to assist Bermuda’s domestic courts (including the Supreme Court of Bermuda, criminal justice agencies outside Bermuda in the investigation and the Court of Appeal for Bermuda and the Privy Council, sitting as prosecution of any criminal matter, including the service of criminal Bermuda’s final court of appeal). process and the gathering of evidence. The scope of this legislation could extend to the provision of mutual legal assistance for the investigation and British overseas territories such as Bermuda do not have the authority to prosecution of crimes against foreign anti-corruption laws, such as the US become a party to international treaties in their own right, unless they have Foreign Corrupt Practices Act of 1977 (FCPA) and the UK Bribery Act 2010. been expressly authorised and entrusted to do so by the UK government. In the context of the UK Bribery Act 2010, it should be noted that: Bermuda’s government has been entrusted by the UK government to • a number of individuals and corporate entities resident in Bermuda enter into tax information exchange agreements and certain other bilateral may be subject to the extra-territorial reach of the UK Bribery Act 2010 and multilateral commercial agreements of local concern, pursuant to (as indeed they may be subject to the extra-territorial reach of the US various entrustment agreements dated 12 September 1968, 27 July 2005, 1 FCPA); and December 2009 and 28 November 2014, but the scope of this entrustment • Bermuda’s Criminal Code Act 1907 contains a provision, at section does not extend to all international treaties. 149, that provides that any person who, without lawful excuse (the For the most part, the UK must extend international treaties to proof of which is expressed to rest on him, although this ‘reverse Bermuda, subject to consultation with and the agreement of Bermuda’s burden’ defence may be the subject of a potential constitutional government. This is sometimes done at the time of the UK’s ratification of challenge in the future) does any act which he is, by any act or act of an international treaty, but it is occasionally done at some later date. the UK parliament, forbidden to do, or omits to do any act which he is, At present, neither the United Nations Convention against Corruption by the provisions of any such act or act of the UK parliament, is guilty (UNCAC) nor the OECD’s Convention on Combating Bribery of Foreign of a summary offence, unless some mode of proceeding against him Public Officials in International Business Transactions (the OECD Anti- for such disobedience is expressly provided by the act or act of the UK Bribery Convention) have been formally extended by the UK to Bermuda. parliament, and is intended to be exclusive of all other punishment. The OECD’s Working Group’s Phase 3 Report (March 2012) and Transparency International have expressed some criticism of the length It is also important to note that there are various extradition laws appli- of time being taken by the UK to extend the convention into all of the cable in Bermuda, including the UK’s Extradition Acts 1870 and 1873, UK’s overseas territories. Currently, UNCAC has only been extended Bermuda’s Extradition Act 1877 and various orders made thereunder. to the three Crown dependencies (Jersey, Guernsey and the Isle of Man, These extradition laws were considered by the Privy Council in Deuss v The on 9 November 2009) and to one of the 14 overseas territories (British Attorney-General for Bermuda [2009] UKPC 38. Virgin Islands, on 12 October 2006). The OECD Anti-Bribery Convention has only been ratified by the three Crown dependencies and one of the 2 Foreign and domestic bribery laws overseas territories (the Cayman Islands). Identify and describe your national laws and regulations On 14 March 2013, Bermuda’s Governor George Fergusson announced prohibiting bribery of foreign public officials (foreign bribery that the UK is expected to extend the OECD Convention on Combating laws) and domestic public officials (domestic bribery laws). Bribery of Foreign Public Officials in International Business Transactions to Bermuda, but this has still not yet occurred. In March 2014, the Domestic bribery laws Bermuda government announced that it was preparing to ask the UK to Common law extend UNCAC to Bermuda, and the Premier described this as a ‘front- Bermuda’s criminal law has been codified in statute, under the Criminal burner issue for this Government’. In August 2014, the Bermuda govern- Code Act 1907 (as amended from time to time). The Privy Council has held, ment initiated an industry consultation exercise regarding its proposed on a number of occasions, that Bermuda’s Criminal Code was ‘intended to draft legislation (for proposed inclusion, by amendment, in Bermuda’s replace the common law’ and that ‘the principles of liability in crime are Good Governance Act) designed to meet the requirements of article 16 of governed in Bermuda by the Criminal Code, under the Criminal Code Act UNCAC, prohibiting the corruption of foreign public officials. The draft 1907’. See, eg, Furbert v The Queen [2000] 1 WLR 1716 and Robinson v The legislation has not yet been enacted, but it is expected to be tabled for Queen [2011] UKPC 3. debate in Parliament in 2015. www.gettingthedealthrough.com 33 BERMUDA Sedgwick Chudleigh Ltd
In the circumstances, it is doubtful that any common law offence of Commission, the Auditor General, and the Constituency Boundaries bribery would be recognised in Bermuda (even though such a common law Commission, shall not be subject to the direction or control of any other offence was recognised under English common law until the UK Bribery person or authority, save that the Supreme Court of Bermuda may exercise Act 2010 came into force on 1 July 2011). jurisdiction in relation to any question whether such officers have exer- cised their functions in accordance with the Constitution. Legislation It is also worth noting that under Bermuda’s Commissions of Bermuda’s foreign and domestic anti-bribery and anti-corruption laws Inquiry Act 1935, the Governor of Bermuda has the power to initiate a have not been consolidated into a single statute. They are instead derived commission of inquiry into the conduct of any civil servant, the conduct from a number of sources of primary and secondary legislation. or management of any department of the public service, or into any matter Although Bermuda’s criminal law has been codified in the Criminal in which an inquiry would in the opinion of the Governor be for the public Code Act 1907, and the Criminal Code contains a number of important welfare. Under recent amendments made by the Commissions of Inquiry provisions relating to bribery and corrupt behaviour, there are also a num- Amendment Act 2014, the power to initiate a commission of inquiry will ber of other pieces of legislation that contain laws and regulations that now be vested, in a variety of cases, in the Premier, instead of the Governor. relate to certain other types of corrupt behaviour, some of which are more obscure than others. Foreign bribery laws This legislation includes, for example: There is, as yet, no local Bermuda statute that specifically relates to bribery • the Foreign Recruiting Act 1874; of a foreign public official, and in the absence of express legislative provi- • the Post Office Act 1900; sion, it is unlikely that a court would conclude that there is such an offence • the Evidence Act 1905; under Bermuda’s common law. • the Municipalities Act 1923; It is, however, potentially arguable that the bribery and corruption pro- • the Commissions of Inquiry Act 1935; visions of the Criminal Code Act 1907, and the other pieces of Bermuda • the Quarantine Act 1946; legislation referred to above, might be broad enough to encompass brib- • the Parliament Act 1957; ery of foreign public officials (although this is not yet an argument that has • the Marine Board Act 1962; been developed before, or considered by, a Bermuda court). • the Bermuda Constitution Order 1968; As discussed elsewhere, however, it is likely that the OECD Anti- • the Legislature (Appointment, Election and Membership Controversies) Bribery Convention will soon be extended by the UK to Bermuda. Act 1968; In the meantime, since many Bermuda business entities are interna- • the Public Treasury (Administration and Payments) Act 1969; tional in scope, they must operate on the basis that they, and their business • the Jurors Act 1971; activities, may well be covered by the laws of other jurisdictions such as the • the Commissioners for Oaths and Notaries Public Act 1972; US and the UK. All international businesses based in Bermuda should pay • the Police (Discipline) Orders 1975; very close attention, therefore, to the provisions of the US FCPA and the • the Real Estate Agents’ Licensing Act 1976; UK Bribery Act 2010. • the Parliamentary Election Act 1978; • the Companies Act 1981; Foreign bribery • the Barristers’ Code of Professional Conduct 1981; 3 Legal framework • the Audit Act 1990; • the Bermuda International Conciliation and Arbitration Act 1993; Describe the elements of the law prohibiting bribery of a • the Consumer Protection Act 1999; foreign public official. • the Employment Act 2000; • the Ombudsman Act 2004; Not applicable. • the Internal Audit Act 2010; • the Justice Protection Act 2010; 4 Definition of a foreign public official • the Good Governance Act 2011; How does your law define a foreign public official? • the Good Governance Act 2012; Not applicable. • the Referendum Act 2012; and • the Bermuda Fire and Rescue Service (Discipline) Regulations 2013. 5 Travel and entertainment restrictions The most relevant laws which prohibit the bribery of domestic ‘public offic- To what extent do your anti-bribery laws restrict providing ers’ (or persons appointed to carry out public functions even though they foreign officials with gifts, travel expenses, meals or might not be characterised ‘public officers’ in a narrow sense), relate to entertainment? bribery and other forms of corruption, including: • corruption in the determination of arbitral proceedings; Not applicable. • corruption in the appointment of liquidators of companies; • corruption by ‘public officers’, and those employed in the public 6 Facilitating payments service, in the discharge of their duties; Do the laws and regulations permit facilitating or ‘grease’ • corruption by ‘public officers’ which amounts to extortion; payments? • corruption in the conduct of judicial proceedings by a member of the judiciary; Not applicable. • corruption in the conduct of judicial proceedings by a court official, or someone concerned with the administration of justice; 7 Payments through intermediaries or third parties • corruption of an agent in connection with the business affairs of his In what circumstances do the laws prohibit payments through principal; intermediaries or third parties to foreign public officials? • corruption of an officer of the Internal Audit Department; • corruption of or by a member of parliamentary office; Not applicable. • corruption in connection with a parliamentary election; • corruption in connection with a referendum; 8 Individual and corporate liability • corruption in connection with the work of the Public Service Can both individuals and companies be held liable for bribery Commission; and of a foreign official? • collusion in the awarding of government contracts. Not applicable. There are also important constitutional provisions that require that vari- ous constitutional officers, including the Attorney-General, the Director of Public Prosecutions, the Ombudsman for Bermuda, the Public Service
34 Getting the Deal Through – Anti-Corruption Regulation 2015 Sedgwick Chudleigh Ltd BERMUDA
9 Civil and criminal enforcement Under the Companies Act 1981, accurate records must be kept by Is there civil and criminal enforcement of your country’s every company in relation to all sums of money received and expended by the company, all sales and purchases of goods by the company and the foreign bribery laws? assets and liabilities of the company. These records are to be kept for a Not applicable. period of five years. Unless all the company’s members and directors have dispensed with 10 Agency enforcement the requirement to do so, its directors are required to present the compa- ny’s financial statements at the company’s annual general meeting. The What government agencies enforce the foreign bribery laws statements include: and regulations? • a statement of the reports of its operations for the period; Not applicable. • a statement of any retained earnings or deficit; • its balance sheet; 11 Leniency • a statement of any changes in the company’s financial position or cashflow; Is there a mechanism for companies to disclose violations in • notes to the financial statement; together with exchange for lesser penalties? • any other information required to be presented by virtue of the com- Not applicable. pany’s constitutional documents.
12 Dispute resolution Every shareholder is entitled to request and see a copy of the company’s financial statements. Can enforcement matters be resolved through plea In addition to the general rules prescribed by the Companies Act 1981, agreements, settlement agreements, prosecutorial discretion a number of industry specific rules have been introduced by the Bank and or similar means without a trial? Deposit Companies Act 1999, the Insurance Act 1978, the Trusts (Regulation of Trust Business) Act 2001, the Investment Business Act 2003, the Investment Not applicable. Funds Act 2006, the Credit Unions Act 2010 and the Corporate Service Provider Business Act 2012. These acts are supplemented by regulations, as 13 Patterns in enforcement well as guidance texts including Statements of Principles, Codes of Conduct Describe any recent shifts in the patterns of enforcement of the and Guidance Notes. foreign bribery rules. Although the specific rules governing the frequency with which accounts are to be prepared and filed with the island’s financial regulator, Not applicable. the BMA, vary from sector to sector, there are a number of hallmarks that are common to all industries. 14 Prosecution of foreign companies Entities regulated by the BMA must appoint independent auditors, In what circumstances can foreign companies be prosecuted failing which one is appointed by the regulator. Generally, auditors for foreign bribery? of regulated entities are required to notify the BMA when they resign or do not seek reappointment, or where they modify, qualify, deny or Not applicable. reissue their audit opinion, or where they issue an adverse audit opinion. Depending on the industry, guidance may be provided which makes clear 15 Sanctions what the auditor is to regard as being of ‘material significance’ to the What are the sanctions for individuals and companies violating audit. Where the guidance has been issued, it generally makes reference the foreign bribery rules? to misstatements, doubts relating to solvency, material weaknesses in internal controls, misconduct of senior officers in connection with the Not applicable. accounts, and evidence of fraud. Separately, it is worth mentioning that Bermuda has a well-established 16 Recent decisions and investigations framework of anti-money-laundering laws. Both the Proceeds of Crime Identify and summarise recent landmark decisions or Act 1997 and the Proceeds of Crime (Anti-Money Laundering and Anti- investigations involving foreign bribery. Terrorist Financing) Regulations 2008 contain a number of provisions that promote accurate financial reporting, with a view to identifying criminal Not applicable. conduct and preventing the concealment of proceeds of criminal conduct.
Financial record keeping 18 Disclosure of violations or irregularities 17 Laws and regulations To what extent must companies disclose violations of anti- What legal rules require accurate corporate books and records, bribery laws or associated accounting irregularities? effective internal company controls, periodic financial Where bribery or corruption has a material effect on the financial affairs of statements or external auditing? a company, the auditor may be obliged to report it to the BMA. There are a number of statutes and statutory instruments in Bermuda that Where there is suspicion, or knowledge, of money-laundering in con- contain legal rules requiring the keeping of accurate corporate books and nection with corrupt practices, a duty to report that suspicion or knowledge records. is imposed by Bermuda’s anti-money-laundering laws. Which specific rules apply in any particular case depends on the legal nature of the public body or corporate entity (whether a company, a segregated 19 Prosecution under financial record keeping legislation accounts company, a partnership, a trustee, an investment fund or a liquidator) Are such laws used to prosecute domestic or foreign bribery? and the extent to which that corporate entity is regulated locally by a local regulator such as the Bermuda Monetary Authority (BMA) or the Bermuda We are not aware of Bermuda’s corporate laws relating to financial record Bar Council under various regulatory statutes (which will depend, in turn, on keeping being used in any systematic fashion to prosecute domestic or for- the nature of its business or service). The main regulated business sectors in eign bribery offences. However, financial records (or the lack of financial Bermuda are insurance, investment, bank and deposit taking institutions, records in breach of record keeping obligations) often provide important trust businesses, and corporate service providers and professional service evidence for the investigation and prosecution of such offences. providers. The Companies Act 1981 is the primary statutory source of company law in Bermuda, and contains provisions relating to financial reporting of companies.
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20 Sanctions for accounting violations sought to be made). Other taxes payable in Bermuda are set out in the What are the sanctions for violations of the accounting rules Taxes Management Act 1976 (principally relating to consumption taxes payable on goods and services) and the Corporate Services Tax Act 1995 associated with the payment of bribes? (under which a corporate services tax is payable on gross earned revenue). Section 351 of the Criminal Code Act 1907 makes ‘false accounting’ an In general terms, therefore, it would not be possible to offset any taxes offence, liable on summary conviction to a fine of BM$10,000 or impris- or contributions payable by a company by taking account of sums paid in onment for five years, or both and on conviction on indictment to a fine of bribes, or for facilitation payments. BMD$100,000 or imprisonment for 10 years or both. Section 353 of the Criminal Code Act 1907 makes ‘false statements by Domestic bribery company directors’ an offence, liable on summary conviction to a fine of 22 Legal framework BMD$10,000 or imprisonment for five years or both; and on conviction on indictment to a fine of BMD$100,000 or imprisonment for 10 years or Describe the individual elements of the law prohibiting bribery both. of a domestic public official. Sections 395 and 396 of the Criminal Code Act 1907 make certain ‘frauds’ As discussed in question 2, there is no unified, or consolidated, anti-bribery and ‘false statements’ by officials of corporations and companies an offence, statute in Bermuda. Instead, there are numerous sources of law relating to including the falsification or making of false entries in any books or accounts the prohibition of bribery and corruption. We set out below the individual of a company, liable on conviction by a court of summary jurisdiction to elements of the local laws prohibiting the bribery of domestic public offi- imprisonment for 12 months and on conviction on indictment to imprisonment cials that we believe are most relevant in the context of international and for two years. domestic commerce. Section 397 of the Criminal Code Act 1907 makes ‘fraudulent false accounting’ an offence, liable on conviction by a court of summary jurisdiction to imprisonment for 12 months and on conviction on indictment Interference with the Governor or ministers, section 97 of the to imprisonment for two years. Criminal Code Act 1907 Section 398 of the Criminal Code Act 1907 makes ‘false accounting This offence applies to any person who deliberately carries out any act by public officers’ an offence, liable on conviction by a court of summary which is calculated to interfere with the free exercise by a government jurisdiction to imprisonment for 12 months and on conviction on minister of his or her duties, or with the authority or his or her office. indictment to imprisonment for two years. Otherwise, no sanctions are provided for under local Bermuda law for Official corruption, section 111 of the Criminal Code Act 1907 violations of accounting rules specifically relating to the payment of bribes. This offence applies to any person who is employed in the public service As discussed in question 17, however, every company must keep proper (ie, the civil service), or any person who holds a public office. The offence accounts. Where a company fails to do so, every officer of that company is is committed where that person corruptly: asks for, receives or otherwise liable to a fine of BMD$500. If any director of a company fails to take all obtains any property or any benefit, either for himself or for someone reasonable steps to comply with the obligation to lay financial statements else, in exchange for doing something or omitting to do something, in the before the company in general meeting, he is liable to a fine of BMD$1,000. discharge of his or her office. Also as discussed in question 17, the auditor of a regulated entity is The offence of official corruption can also be committed by any person obliged to notify various states of affairs to the BMA. That duty will arise who corruptly gives, confers or otherwise procures, upon any person in the where, for example, discovery of corruption leads the auditor to resign, public service or any person who holds public office, any benefit of any kind qualify their report, revise a previously issued report, or where the auditor in exchange for undertaking some act, or omitting to take some act. believes the bribe is otherwise of ‘material significance’ to their audit. If an For the purpose of the offence of official corruption only, the term auditor fails to notify the BMA when a duty to do so is triggered, they com- ‘public officer’ is defined to include members of both the Bermuda mit a criminal offence and, depending on the sector in which the company Regiment and the Bermuda Police Service. is engaged, face a fine of between BMD$25,000 and BMD$50,000. Separately, where the directors of a company seek to hide the fact that Extortion by public officers, section 112 of the Criminal Code bribes have been paid, by for example failing to comply with the require- Act 1907 ment to produce the company’s financial statements at its general meeting, This offence applies to any person employed in the public service. The they can each face a fine of BMD$1,000. Where insurers seek to hide the offence is committed when that person accepts any reward or property fact that bribes have been paid by delaying or failing to comply with their that is beyond their regular pay and remuneration or accepts a promise of duties to file statutory financial statements or their annual return, they can reward, in exchange for performing their duties. be liable to penalties ranging from BMD$500 per week to BMD$5,000 per week for each breach. Judicial corruption, section 116 of the Criminal Code Act 1907 Where corruption engages Bermuda’s anti-money-laundering regime, This offence applies to any person who holds judicial office. The offence conviction of a money-laundering offence carries with it a fine of up to is committed when that person corruptly asks for, receives or otherwise BMD$50,000 on summary conviction, or alternatively a fine of up to obtains any property or benefit, either for himself or for someone else, in BMD$750,000 and imprisonment for two years if convicted on indictment. exchange for carrying out, or omitting to carry out, some act in their judi- cial capacity. The provision also creates an inchoate offence of judicial 21 Tax-deductibility of domestic or foreign bribes corruption. Do your country’s tax laws prohibit the deductibility of domestic or foreign bribes? Official corruption that is not judicial but relates to the Bermuda’s tax laws do not generally contemplate the deductibility of committing of offences, section 117 of the Criminal Code 1907 expenses, but it is unlikely that payments for domestic or foreign bribes This offence can be committed by a justice of the peace or a person would be accepted as a deductible expense in any event. employed in connection with the prosecution of offenders, but who does By way of explanation, Bermuda does not have a complicated domes- not act in a judicial capacity. An offence is committed when such a person tic tax regime comparable to that which exists in many other jurisdictions. corruptly: asks for, receives or otherwise obtains any property or benefit, There are, for example, no corporation taxes or taxes on capital gains, either for themselves or for someone else, on account of doing something, although there are annual government fees payable by various types of legal or omit to do something, with a view to corrupt or improper interference entity. As an equivalent to personal income tax, employers and their employ- with the administration of justice, or the prosecution of an offender. The ees are liable to pay payroll tax (which is charged on a sliding scale) as well offence is also committed by any person who confers, procures or promises as social insurance and pension contributions on behalf of their employees. any property or other benefit to a justice of the peace of person employed There are stamp duties payable on a wide range of instruments and in connection with the prosecution of offenders. transactions, real property taxes payable on real estate in Bermuda, and estate duties payable on the estates of deceased Bermuda residents (which is one area, conceivably, where deductions of certain expenses might be
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Corrupting a holder of judicial office, section 118A of the Criminal A temporary holder of non-established or temporary offices, ie, a per- Code Act 1907 son employed in the public service on a non-permanent basis, to fulfil a This offence applies to any person who: by offering benefits or who through non-permanent role, is to be regarded as ‘public officer’. A consultant hired the promise of a benefit or benefits, or by any other corrupt means, influ- by a government department or ministry is not however, a ‘public officer’. ences, a person who holds judicial office or a law enforcement official. For the purpose of section 33B of the Public Treasury (Administration The offence also applies to any person, who being either a judicial and Payments) Act 1969, ‘appointed or elected official’ means a member of officer or a law enforcement official, accepts any benefit or promise of a parliament, a senator, a person who is appointed or elected to any munici- benefit, on account of doing some act in that capacity. pality, parish council or any other public authority, and includes a person who has held any such office at any time within the five years immediately Offence of collusion relating to government contracts, section 33B preceding the commission of an offence under that section. of the Public Treasury (Administration and Payments) Act 1969 This offence applies to any appointed or elected official who attempts to 25 Public official participation in commercial activities influence the awarding of a government contract, regardless of whether Can a public official participate in commercial activities while or not he has any interest (whether legal, beneficial, fiduciary, family or serving as a public official? otherwise) in any of the persons bidding for the contract. Further, if a contractor attempts to gain an unfair advantage when For the purpose of section 33B of the Public Treasury (Administration and bidding for a government contract by obtaining, from a public officer or Payments) Act 1969, section 33B(3) provides that an appointed or elected from an appointed or elected official, information which is not available to official who bids for a government contract does not commit an offence of all persons bidding for that contract, the contractor and the public officer collusion relating to a government contract solely by reason of that fact. or the appointed or elected official commit an offence. There is no blanket prohibition on the participation of public officers in private commercial activities. The Conditions of Employment and Code 23 Prohibitions of Conduct (the Code of Conduct), which form part of the Bermuda Public Service Commission Regulations, recognise that public officers may have Does the law prohibit both the paying and receiving of a bribe? private interests that from time to time conflict with their public duties. In terms of law prohibiting the bribery of local public officials: The Code of Conduct provides that ‘… there is a reasonable public expec- • the offence of official corruption can be committed by the payer and tation that where such conflict occurs it will be resolved in favour of the the receiver; public interest rather than your own’. • the offence of extortion by a public officer prohibits receiving ‘any Public officers are required to disclose potential conflicts of interest, reward beyond his proper pay and emoluments’; not only those involving business acquaintances, but also those involving • the offence of judicial corruption applies to both paying and receiving relatives or close friends. Public officers are also subject to a positive obli- ‘any property or benefit of any kind’; gation to ‘stand down’ in any decision making process where their inde- • the offence of official corruption that is not judicial corruption but pendence is compromised. relates to the committing of offences applies to paying or receiving In Cory Hill v DaCosta [2014] SC (Bda) 55 Civ, Hellman J, sitting in ‘any property or benefit of any kind’; and the Supreme Court of Bermuda, recently considered the provisions of • the offence of corrupting a holder of judicial office applies to both the Civil Service Code of Conduct, which form part of the Public Service giving and receiving ‘benefits or promises of benefits of any kind’. Commission Regulations 2001. The Court refused to enforce an oral con- tract that had allegedly been entered into by a civil servant for private 24 Public officials profit, without proper authorisation of his conflict of interest. The judge held that ‘the contract was both unlawful and contrary to public policy’ and How does your law define a public official and does that that ‘enabling a civil servant to use his public office for private gain would definition include employees of state-owned or state- tend to interfere with the impartial discharge of his duties and to under- controlled companies? mine public confidence in the Civil Service’. In the interests of transparency, section 30(6) and (7) of the Bermuda The term ‘public officer’ is defined by both Bermuda’s Constitution and the Constitution disqualifies any person from election to the House of Interpretation Act 1951. Assembly, or appointment to the Senate, where they fail to disclose any Section 102 of the Constitution defines ‘public officer’ to mean the interest they have in a government contract within seven days of their nomi- holder of any ‘public office’, and includes a person appointed to act in any nation as a candidate for election, or within seven days of their appointment public office. ‘Public office’ is separately defined to include any paid office to the Senate taking effect. of the ‘public service’, excluding: There exists in Bermuda a convention whereby members of parliament • members of the House of Assembly or Senate; and senators voluntarily register all pecuniary interests which either they or • Supreme Court and Court of Appeal judges; their spouse possess, that can give the impression of influencing any action they • members of the public Service Commission; may take in their legislative capacity. Such interests include remunerated and • members of governmental boards; and unremunerated directorships, remunerated employment or other occupational • employees of any corporation established by the government for compensation, vocational or trade activities, and the provision of client services public purposes which is not directly controlled by either the Governor which relate to the legislator’s position in Parliament or the Senate. Legislators or any government minister, for example, a quasi-autonomous non- should also disclose corporate interests where the company has a market governmental organisation. value of BMD$50,000 or greater, of where they hold beneficial interests in more than 1 per cent of the issued share capital. The Parliamentary Register of The Interpretation Act 1951, which applies to the interpretation and con- Interests is publicly available online via the Bermuda parliament website, www. struction of every act of the Bermuda Legislature, adopts a similar defini- parliament.bm. tion. It provides, at section 3, that a ‘public officer’ means any paid office in the ‘public service’. The ‘public service’ is defined separately to include 26 Travel and entertainment mean the service of the Crown in a civil capacity in respect of the govern- ment of Bermuda. Describe any restrictions on providing domestic officials As noted in question 22, for purposes of the offence of official corrup- with gifts, travel expenses, meals or entertainment. Do the tion only, ‘public officer’ is defined to include members of the Bermuda restrictions apply to both the providing and receiving of such Regiment and the Bermuda Police Service. benefits? The Supreme Court of Bermuda has held that the meaning given to the words ‘public officer’ accords with that adopted in most Commonwealth The Code of Conduct prohibits public officers from accepting gifts or states that have written constitutions, in that it seeks to replicate the British favours, including free accommodation, free travel and entertainment structure of an independent civil service, which in the case of Bermuda has vouchers, in connection with the performance of their official duties. The been designated as a ‘public service’ (see Junos v Minister of Tourism and prohibition applies not only for gifts and favours they themselves receive, Transport [2009] Bda LR 2). but also gifts and favours offered to members of their family.
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Where the provision of gifts, travel expenses, meals or entertainment 29 Penalties and enforcement to a member of the public service in exchange for them doing, or omitting What are the sanctions for individuals and companies violating to do, something in the discharge of their office, it may amount to official the domestic bribery rules? corruption, which contravenes section 111 of the Criminal Code 1907. There is no express restriction on providing members of the House of A person who is found guilty of official corruption, extortion by public Assembly and Senate with gifts, travel expenses, meals or entertainment. office, judicial corruption, official corruption that is not judicial in nature Where it is done with the intention to sway a government minister in the but relates to the committing of offences, or corrupt practices, is liable to a exercise of his discretion, it may contravene section 97 of the Criminal fine of BMD$50,000 and/or imprisonment for five years on summary con- Code, which prohibits the interference with the free exercise by a minister viction, or an unlimited fine and/or imprisonment for 15 years if convicted of the duties or authority of his office as such. on indictment. In the interests of transparency, members of parliament have adopted A person found guilty of corrupting a holder of judicial office is liable a convention whereby voluntary disclosure is given of gifts received which to punishment on summary conviction to a fine of BMD$50,000 and/or are valued at BMD$500 or greater, or any material advantage received that imprisonment for five years, and on conviction on indictment to a fine of has a value 0.5 per cent or greater of the legislator’s parliamentary salary. BMD$100,000 and/or imprisonment for 10 years. It does not matter whether the gift was received from a local or foreign A person found guilty of collusion relating to government contracts con- company, organisation or person. Disclosure should be made where the trary to section 33B of the Public Treasury (Administration and Payments) gift or advantage is received by the legislator, their spouse or a company Act 1969 is liable on summary conviction to a fine of BMD$50,000 or to or organisation in which the legislator or their spouse holds a controlling imprisonment for five years, or both; and on conviction on indictment to interest. Disclosure should also be made of any hospitality given or services an unlimited fine or imprisonment for 15 years, or both. offered, either for free or at a price below that which is generally charged to There are a range of other sanctions applicable to the other members of the public. miscellaneous rules governing bribery and corrupt practices under the Bermuda legislation referred to in question 2. 27 Gifts and gratuities Are certain types of gifts and gratuities permissible under your 30 Facilitating payments domestic bribery laws and, if so, what types? Have the domestic bribery laws been enforced with respect to facilitating or ‘grease’ payments? The Criminal Code provisions on corruption and extortion contain no exemptions relating to types of gifts and gratuities. Accordingly, all gifts No distinction is made under Bermuda statute law between bribes on the and gratuities that are caught by the Criminal Code provisions, no matter one hand, and facilitation payments or ‘grease’ payments on the other. We how small, will trigger liability. are not aware of local bribery laws having been enforced with respect to Generally, members of parliament and members of the Senate do not such payments. disclose details of gifts, benefits, hospitality, and beneficial shareholdings which are below a specific threshold (see question 26). 31 Recent decisions and investigations Identify and summarise recent landmark decisions and 28 Private commercial bribery investigations involving domestic bribery laws, including any Does your country also prohibit private commercial bribery? investigations or decisions involving foreign companies. Section 392 of the Criminal Code 1907 makes it an offence for private indi- Prosecutions for offences of corruption and bribery are relatively rare in viduals to engage in ‘corrupt practices’. A person is guilty of engaging in practice in Bermuda, although in recent years, there have been a number of ‘corrupt practices’ where he: investigations, and a number of both successful and unsuccessful prosecu- • acts as an agent for another and corruptly accepts or obtains a gift or tions, not all of which have been publicly reported. other form of consideration as an inducement or reward for doing (or In Soares and Outerbridge v Duffy [1989] Bda LR 74, the court upheld a forbearing to do) any action in relation to his principal’s business or conviction for the offence of corrupt practices. In his judgment, Hull J noted affairs, or for forbearing to show favour or disfavour to any person in that ‘this was the first occasion on which persons have been prosecuted for connection with his principal’s affairs; or offences under section 392 (1) of the Criminal Code, although it has existed as • corruptly gives or agrees to give any gift or consideration to any agent a crime for many years’. as an inducement or reward for doing or forbearing to do any act in Although not directly engaging an offence of bribery or corruption, relation to the principal’s business or affairs, or for showing or for- it is of interest that in Martyn v R [2006] Bda LR 83, the defendant lost bearing to show favour or disfavour to any person in relation to his an appeal against conviction for the offence of conspiracy to defraud, by principal’s affairs. falsely obtaining Bermudian status through the use of falsely notarised birth and marriage certificates. Directors and officers of companies owe a fiduciary duty towards the com- In The Commissioner of Police v Bermuda Broadcasting Co Ltd [2007] Bda pany in respect of which they serve as a director, and they must at all times LR 40, the Supreme Court of Bermuda had to consider whether to restrain the act honestly, in good faith and with a view to the best interests of the com- Bermuda media from publishing confidential police documents relating to a pany. No director is entitled to earn a secret profit on account of his office. lengthy police investigation into allegations of corruption conducted between A director or officer is deemed not to be acting honestly and in good faith 2002 and 2004 regarding the affairs of the Bermuda Housing Corporation. if he fails on request to make known to the auditors of the company full This investigation resulted in a decision taken by the then acting Director of details of any emolument, pension or other benefit that he has received or Public Prosecutions in July 2004 not to recommend any prosecution, given it is agreed that he should receive from the company or any of the com- the state of the evidence and Bermuda law in this area. The court refused to pany’s subsidiaries, or any loan he has received or is to receive from the restrain publication, noting ‘the media’s constitutional right to inform the company or any of its subsidiaries; or if he fails to disclose at the first oppor- public about serious allegations concerning important public figures’. The tunity at a meeting of directors or by writing to the directors his interest in judgment was upheld both by the Court of Appeal for Bermuda and by the any material contract or proposed material contract with the company or Privy Council in Commissioner of Police v Bermuda Broadcasting Co Ltd [2008] any of its subsidiaries or his material interest in any person that is a party UKPC 5. to a material contract or proposed material contract with the company or The most recent reported judgment relating to a local prosecution for any of its subsidiaries. bribery and corruption offences is Cosham v Wilson [2012] Bda LR 13. The Section 250 of the Companies Act 1981 makes it an offence for private prosecution appealed against the sentence that had been imposed on the individuals to corruptly induce shareholders or creditors of a company to defendant by the magistrate. The defendant had been employed by the secure his appointment or nomination as the company’s liquidator. Bermuda Police Service as a civilian data entry clerk, and she was assigned to the magistrates court where she was responsible for entering traffic tick- ets onto the court’s computer system. That meant that she had access to the database, and could manipulate it. In particular, she could withdraw
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Update and trends As discussed above, it is anticipated that the UK will extend the OECD to introduce protections for whistle-blowers who notify authorities of Convention on Combating Bribery of Foreign Public Officials in crimes committed by their employers, or where they are directed by International Business Transactions to Bermuda relatively soon, with their employer to engage in conduct that is unlawful. associated domestic legislation being enacted in Bermuda through the An increase in investigations and prosecutions for bribery and medium of Good Governance legislation. corruption offences would be consistent with the fact that there has Although this has not yet occurred, it will represent a very been a considerable increase in Bermuda in the number of regulatory significant development when it does, whether or not Bermuda seeks to and criminal investigations and prosecutions for money laundering replicate the form and content of the UK’s Bribery Act 2010, or prefers and recovery of the proceeds of crime, as a result of the Bermuda to adopt Canadian legislation as its model. government’s commitment to comply with international standards in Even without comprehensive new anti-corruption legislation yet in this respect. place, it is likely that prosecutions for corruption and bribery offences One further development of note is that Bermuda’s parliament will increase in the future in Bermuda. has recently enacted a Casino Gaming Act 2014, which seeks to license One reason for this is the heightened scrutiny that is being applied and regulate casinos and casino operators, and which will involve the generally to the conduct of public officials in Bermuda, including by way establishment of a Casino Gaming Commission for that purpose. The of the recently introduced offence of collusion relating to government Casino Gaming Act 2014 introduces a number of gambling-related contracts, as discussed above. offences, including offences of cheating, forgery, counterfeiting and Another reason is that there is now statutory protection in place impersonation. for whistle-blowers. The Employment Act 2000 has been amended
parking tickets. The prosecution’s case was that the respondent had with- It is also of interest that in the course of the trial that led to the appeal drawn 79 parking tickets, nine of which related to a vehicle registered to against conviction in Bolden v Bolden v R [2012] Bda LR 34, one of the her sister. defendants made a number of allegations during the course of his evidence After initially pleading not guilty, she eventually pleaded guilty at trial of corruption on the part of various public officials. It has been reported to offences of fraudulent conspiracy and corruption. In imposing a custo- that those allegations have been the subject of further investigation, but as dial sentence of 12 months, Chief Justice Ground held that: yet no further prosecution has been initiated. More recently, there have been two reported court decisions relating These were very serious offences. This young lady was put in a posi- to the powers of the Ombudsman for Bermuda to conduct investigations tion of trust. She was employed by the police service working in a court into maladministration by public authorities, arising out of a specific environment and she must have understood what that involved and investigation into the affairs of the Corporation of Hamilton, and its required of her. She was given access to sensitive information and the decision to grant a lease to develop the Hamilton waterfront. In Re the Office ability to change it. She did that. The evidence was plain that she was of the Bermuda Ombudsman [2013] SC (Bda) 72 Civ, the Supreme Court doing it for money.… People who are put in positions of responsibility of Bermuda held the Mayor and the Deputy Mayor of the Corporation and trust like this have to understand that if they breach that trust it is of Hamilton to be in contempt of the Ombudsman’s investigations; and not just a matter of a fine. You cannot buy your way out of these things. in The Corporation of Hamilton v The Ombudsman for Bermuda [2014] SC Nor is it an excuse to say, as she did, that it was just part of the cul- (Bda) 1 Civ, the Supreme Court of Bermuda rejected the Corporation of ture. I do not in fact accept that, but even if it were, if you are offered Hamilton’s challenge to the legality of the Ombudsman’s investigation into the opportunity at this level and if you see that those around you are their affairs. corrupt, then you should stand up to that, and the law will encourage As set out at the answer to question 25, the Supreme Court of Bermuda people to stand up for what is right and honest by penalising them if has also recently refused to enforce an unlawful contract that had been they do something that is wrong and dishonest. The Magistrate should allegedly entered into by a civil servant, while using his public office for have understood that. He was quite wrong to impose fines. I under- private gain: see Cory Hill v DaCosta [2014] SC (Bda) 55 Civ. stand that they were substantial fines but they could not meet the vice that was present here. Corrupt offences like this require sentences of immediate imprisonment and that is what the court should always impose bar really exceptional circumstances. Family circumstances, even young children, are not really exceptional circumstances, and an immediate sentence of imprisonment should have been imposed here.
Alex Potts [email protected] Chen Foley [email protected]
EW Pearman Building Tel: +1 441 296 9276 20 Brunswick Street Fax: +1 441 296 9277/6 Hamilton HM10 www.sedgwick-chudleigh.com Bermuda
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Brazil
Shin Jae Kim, Renata Muzzi Gomes de Almeida, Juliana Sá de Miranda and Cláudio Coelho de Souza Timm TozziniFreire Advogados
1 International anti-corruption conventions Foreign bribery To which international anti-corruption conventions is your 3 Legal framework country a signatory? Describe the elements of the law prohibiting bribery of a The Federative Republic of Brazil is a signatory to the following foreign public official. conventions: The Criminal Code establishes, in article 337-B, the crime of active cor- • the Inter-American Convention Against Corruption, of the ruption in international business transactions. Such crime consists of the Organization of American States (OAS), adopted on 29 March 1996 act of promising, offering or granting, directly or indirectly, any improper (ratified by the National Congress of Brazil through Legislative Decree advantage to a foreign public official or to a third party, in order to lead the No. 152 of 25 June 2002, and promulgated by the President of Brazil official in practicing, omitting or delaying an official act related to an inter- through Presidential Decree No. 4,410 of 7 October 2002); national business transaction. The sanctions for such crime are imprison- • the Convention on Combating Bribery of Foreign Public Officials in ment from one to eight years and a fine to be set by the federal criminal International Business Transactions, of the Organisation for Economic judge. Such sanction can be raised by one-third if, owing to the improper Co-operation and Development (OECD), adopted on 21 November advantage, the foreign public official delays or omits the official act or 1997 (ratified by Legislative Decree No. 125 of 15 June 2000, and prom- practises it in violation of an official duty. ulgated by Presidential Decree No. 3,678 of 30 December 2000); and Article 337-C of the Criminal Code sets forth the crime of influential • the United Nations Convention against Corruption, approved on 31 trading in international business transactions. This crime comprises the October 2003 (ratified by Legislative Decree No. 348 of 18 May 2005, act of requesting, demanding, imposing or obtaining, for the agent or a and promulgated by Presidential Decree No. 5,687 of 31 January 2006). third party, directly or indirectly, any improper advantage or promise of advantage, with the intent to influence a foreign public official in the per- 2 Foreign and domestic bribery laws formance of his or her duties, related to an international business trans- Identify and describe your national laws and regulations action. The sanctions for such crime are imprisonment from two to five prohibiting bribery of foreign public officials (foreign bribery years and a fine. The sanction can be increased by 50 per cent if the agent laws) and domestic public officials (domestic bribery laws). mentions or insinuates that the undue advantage will also be distributed to the foreign public official. In the Federative Republic of Brazil, the Union (ie, the federal entity) has The elements of the law prohibiting foreign bribery of foreign public the exclusive power to legislate on civil, commercial and criminal law and officials by legal entities are set forth in the Clean Companies Act and will to establish general rules for governmental entities and other administra- be detailed in the answers to the following questions. tive law issues. The other federative entities (the federal district, and the various states and municipalities) have the authority to regulate within 4 Definition of a foreign public official their territories the general rules enacted by the Union for administrative issues. How does your law define a foreign public official? The prohibition of domestic bribery is provided for in articles 316 Both the Criminal Code and the Clean Companies Act similarly define a (graft or extortion), 317 (passive corruption), 332 (traffic of influence) and foreign public official as anyone occupying, even if transitorily or without 333 (active corruption) of the Brazilian Criminal Code (Decree-Law No. compensation, a public office, job or position in administrative bodies or 2,848 of 7 December 1940, with several modifications). entities of a foreign country, in diplomatic representations, in companies The first law to expressly prohibit bribery of foreign public officials directly or indirectly controlled by the government of a foreign country or was Federal Law No. 10,467 of 11 June 2002, which included Chapter in international public organisations. II-A (Crimes Committed by Individuals against the Foreign Public Administration) in Title IX (Crimes against the Public Administration) 5 Travel and entertainment restrictions of the Brazilian Criminal Code. The Law was enacted to comply with the OECD Convention. Chapter II-A, which is included in the Brazilian To what extent do your anti-bribery laws restrict providing Criminal Code, holds criminally liable individuals who engage in bribing foreign officials with gifts, travel expenses, meals or foreign public officials in international business transactions. entertainment? Corporate liability for bribery of foreign public officials was adopted The Criminal Code and the Clean Companies Act have provisions prohib- by Federal Law No. 12,846 of 1 August 2013, which came into force on iting the offer, promise or granting of any ‘improper advantage’ to a foreign 29 January 2014, and is being called either the Anticorruption Law or the public official or to any third party related to him or her. Brazilian legisla- Clean Companies Act. The Clean Companies Act establishes the admin- tion and regulation do not have thresholds for what should be considered istrative and civil liability of legal entities in general for bribery of either an ‘improper advantage’ given or offered to a foreign public official. foreign or domestic public officials. This Act is still pending the enactment Therefore, in a case-by-case analysis, Brazilian public authorities can of a Presidential Decree with more detailed regulation at the federal level, either argue that the offer of gifts and payment of travel expenses, meals as of 2 January 2015. Nevertheless, several states and municipalities have and entertainment by private parties to foreign public officials is com- issued their own decrees to regulate the Clean Companies Act within their pletely forbidden, or can adopt the regulation applicable to domestic public territories. officials by analogy.
40 Getting the Deal Through – Anti-Corruption Regulation 2015 TozziniFreire Advogados BRAZIL
6 Facilitating payments legal representatives attend any events of the investigation when their Do the laws and regulations permit facilitating or ‘grease’ presence is required and bear the necessary costs of such attendance. payments? The leniency agreement must establish the conditions for full cooperation No. The Criminal Code and the Clean Companies Act do not permit of the signatory and for the achievement of valid results of the investiga- facilitating or ‘grease’ payments, and such payments should be considered tion and enforcement proceeding. broadly prohibited under Brazilian legislation. The approved leniency agreement can reduce by up to two-thirds the levied fine due to the participation in the foreign bribery. Furthermore, the 7 Payments through intermediaries or third parties agreement will exempt the signatory from the following sanctions: bearing the costs of broad publication of CGU’s final decision on the enforcement In what circumstances do the laws prohibit payments through proceeding; and disbarment from receiving incentives, donations and intermediaries or third parties to foreign public officials? loans by administrative bodies and by financial institutions wholly owned Both the Criminal Code and the Clean Companies Act expressly establish or controlled by the public administration, for a period between one to five that domestic or foreign bribery can be committed not only directly but years. The agreement will not exempt the signatory from the obligation of also indirectly (ie, Brazilian laws prohibit payments made through inter- completely repairing the damage caused by the foreign bribery. mediaries or third parties to foreign public officials). Furthermore, the Clean Companies Act considers the use of intermediaries (either individu- 12 Dispute resolution als or legal entities) to conceal or dissimulate the agent’s real interests or Can enforcement matters be resolved through plea the identity of the beneficiaries of the agent’s acts to be an illegal act per se. agreements, settlement agreements, prosecutorial discretion or similar means without a trial? 8 Individual and corporate liability Can both individuals and companies be held liable for bribery The Brazilian criminal system provides for mandatory prosecution, which means that the prosecutor does not have discretion to freely negotiate a of a foreign official? settlement with the offender to avoid trial. Yes. Individuals can be held criminally liable, whereas companies can There are two legal exceptions, however, that allow the prosecutor to be held administratively or civilly liable for bribery of a foreign official. negotiate an agreement with the offender to prevent him or her from going Moreover, the Clean Companies Act expressly establishes that the legal to trial. entity involved can be held liable regardless of the individual liability of The requirements for the application of both non-prosecution agree- its directors, officers or managers or of any individual suspect of being the ments and deferred prosecution agreements are defined by law and based agent, aider or abettor of the illegal act. on the amount of penalty imposed for the crime and on the offender’s past criminal records. Penalties for corruption, however, do not allow for non- 9 Civil and criminal enforcement prosecution nor deferred prosecution agreements. Is there civil and criminal enforcement of your country’s The recently enacted Criminal Organizations Enforcement Act (Act 12,850/2013) introduced the possibility of actual declination of prosecution foreign bribery laws? in exchange for full cooperation of the offender. Declining prosecution is Yes. Criminal enforcement can be sought against the individual involved only applicable if the offender is not the leader of the criminal organisa- in foreign bribery, under the Criminal Code. In addition, legal entities tion (defined as the gathering of at least four individuals with the intent of involved in such illegal acts can also face civil and administrative enforce- obtaining an advantage by committing crimes punishable with over four ment measures. years of imprisonment or involving transnational crimes) and was the first to effectively cooperate with the authorities. In addition, the cooperation 10 Agency enforcement has to result in at least one of the goals provided in law, such as the iden- tification of co-offenders and the crimes they committed and recovery of What government agencies enforce the foreign bribery laws criminal profits. This cooperation agreement may apply to the crime of and regulations? corruption if committed within the context of a criminal organisation. The provisions of the Criminal Code that hold criminally liable individu- als that engage in bribery of a foreign public official are to be enforced by 13 Patterns in enforcement Federal Criminal Judges, by the Office of Federal Public Prosecutors, and Describe any recent shifts in the patterns of enforcement of the by the Department of Federal Police, as the case involves a foreign state or foreign bribery rules. international organization and a person domiciled in Brazil. The enforcement of the Clean Companies Act against a Brazilian According to Brazil’s Phase 3 Report on implementing the OECD Anti- legal entity suspect of foreign bribery is to be carried out exclusively by the Bribery Convention, 14 allegations of Brazilian individuals and/or compa- Office of the Comptroller General. nies bribing foreign public officials have surfaced since Brazil’s entry into the Convention. Among these 14 allegations, only three are being investi- 11 Leniency gated and formal charges have been brought in only one case. In addition, the Clean Companies Act came into force on 29 January 2014 Is there a mechanism for companies to disclose violations in and no formal proceeding has been publicly disclosed to date. Therefore, it is exchange for lesser penalties? not possible to establish patterns of enforcement of the foreign bribery rules. Yes. Chapter V of the Clean Companies Act regulates leniency agree- ments. According to such rules, the Office of the Comptroller General 14 Prosecution of foreign companies (Controladoria-Geral da União or CGU) can enter into leniency agree- In what circumstances can foreign companies be prosecuted ments with legal entities that have bribed foreign public officials. The for foreign bribery? purpose of the leniency agreement is to identify the other parties involved in the foreign bribery, if any, and the gathering of evidence of the illegal According to the Clean Companies Act, foreign companies which have acts committed. a registered office, branch or representation in Brazil, legally or de facto To enter into a leniency agreement, the legal entity must meet all the organised, even if temporarily, may be prosecuted in Brazil for foreign three following requirements: bribery. • be the first to approach CGU with the intention to cooperate in the investigations; 15 Sanctions • completely stop its participation in the foreign bribery since the date of What are the sanctions for individuals and companies violating proposal of the leniency agreement to CGU; and the foreign bribery rules? • admit its participation in the illegal acts and cooperate fully and per- manently in the investigations and in the enforcement proceeding to Individuals may be prosecuted criminally for the crime of bribery of for- be brought by CGU against other participants, making sure that its eign public officials as per the Brazilian Criminal Code, which establishes, www.gettingthedealthrough.com 41 BRAZIL TozziniFreire Advogados in article 337-B, a penalty of imprisonment from one to eight years as well • comment on the annual management report and proposals to be as a fine. submitted to general shareholders meetings, and In addition, legal entities that engage in foreign bribery may be subject • denounce to the executive officers or the board of directors or, upon to administrative and civil sanctions established by the Clean Companies their omission, to the general shareholders meeting, any errors, Act. wrongdoings or crimes relating to corporate matters, and make sug- Regarding administrative sanctions, legal entities may be fined up to gestions in the interest of the company. 20 per cent of the entity’s gross revenue in the year prior to that in which the administrative proceeding is initiated, or even up to 60 million reais The limited liability companies may have a fiscal board comprised of three in circumstances in which it is not possible to calculate gross revenues. or more members, but such board is not mandatory. In the case of SAs, the Other administrative sanctions include publication of the condemnatory by-laws of the company must indicate whether a fiscal board will exist on decision in the mass media. a permanent basis or only become operational upon shareholder request. Moreover, if the legal entity is found civilly liable under the law, it may be subject to judicial sanctions, including loss of assets, rights and valu- 18 Disclosure of violations or irregularities ables, suspension or partial interdiction of company’s activities, and pro- To what extent must companies disclose violations of anti- hibition to receive incentives, grants, donations or financing from public bribery laws or associated accounting irregularities? entities and financial institutions owned or controlled by the government, for a period of one to five years. The Brazilian legal system does not encompass any specific rule requiring Lastly, liability of the legal entity shall not exclude the personal liabil- companies to disclose information related to any suspected or confirmed ity of its directors, officers, or any individual who has directly contributed events related to any violations involving bribery. to the illegal act. Nonetheless, owing to certain rules by the Brazilian Securities Commission, Brazilian listed companies are required to disclose any 16 Recent decisions and investigations ‘material facts’, save for situations where the disclosure would jeopard- Identify and summarise recent landmark decisions or ise corporate interests. For the purposes of Brazilian law, a ‘material fact’ refers to any decision taken at a shareholders meeting or by management investigations involving foreign bribery. bodies, or any other business fact that could substantially influence the There have been no conclusive decisions yet on investigations or enforce- value of the company’s securities, the decision of investors in trading such ment proceedings involving foreign bribery in Brazil. There are at least securities or the decision of investors in exercising any rights inherent to nine known ongoing cases, however, as the investigations are confidential, the ownership of such securities. no relevant details have been disclosed so far. 19 Prosecution under financial record keeping legislation Financial record keeping Are such laws used to prosecute domestic or foreign bribery? 17 Laws and regulations Rules relating to financial records are usually set for tax and commercial What legal rules require accurate corporate books and records, purposes. The financial record-keeping legislation does not provide for, effective internal company controls, periodic financial and it is not used for, the purposes of prosecuting domestic or foreign cases statements or external auditing? of bribery.
In Brazil, there are two main types of entities: scorporations or SA and 20 Sanctions for accounting violations limited liability companies. Corporations are governed by Law 6,404 of 15 December 1976 (the Corporations Law), while limited liability compa- What are the sanctions for violations of the accounting rules nies are governed by the Brazilian Civil Code (Law 10,406 of 10 January associated with the payment of bribes? 2002). The basic rules governing corporate governance of corporations Relating specifically to anti-bribery laws, there are no specific sanctions for are in the Corporations Law. In such Law there are rules governing the cases related to the violation of accounting rules involving the payment of general meetings of shareholders, board of directors, officers and other bribes. related matters. In addition to the Corporations Law, corporations that It is important to mention, however, that as a general rule provided by are publicly held are also governed by Law 6,385, of 7 December 1976 (the the Corporations Law, directors and officers are not personally responsible Capital Markets Law). In addition, publicly held corporations are also sub- for the liabilities of the company. They may, however, become personally ject to rules issued by the Brazilian Securities Commission (known as CVM liable for losses or damages caused as a result of actions taken by directors in Brazil). or officers with gross negligence, wilful misconduct and in violation of the Although there are no specific anti-bribery laws in relation to financial law or company’s by-laws. Directors and officers have fiduciary duties to record-keeping, the laws that regulate the Brazilian companies contain the company, which include a duty of care in avoiding harm to the com- specific provisions that must be followed. Financial statements, including pany and a duty of loyally placing the company’s interests ahead of their an annual balance sheet, accumulated profit and loss statement, income own. Acting in the best interest of the company and avoiding any potential statement, cash-flow statement (except for a privately held company) with conflict of interests are also notions that must underpin all directors’ deci- a net worth of less than 2 million reais), and (in the case of a publicly held sions. Also, a director elected by a specific shareholder or representing company) a value-added statement, must be prepared under the direction a specific shareholder has the same responsibilities and duties as the of the board of directors, approved by the shareholders and published in other directors to the company and must not defend such interests to the the Official Gazette and one other widely circulated newspaper. The finan- detriment of the company. cial statements of a publicly held company must also be audited. There are certain exceptions to the publication requirement for a privately held 21 Tax-deductibility of domestic or foreign bribes company with fewer than 20 shareholders and a net worth of less than 1 million reais. Do your country’s tax laws prohibit the deductibility of Annual partners or shareholders meetings must be held within the domestic or foreign bribes? first four months following the end of the fiscal year to consider and review Brazilian Income Tax Regulation (RIR/99) establishes that expenses are financial statements and management accounts, appoint new managers, only deductible for the purposes of corporate income taxes (IRPJ/CSLL) if applicable, and decide on any other matters included in the agenda. if they are normal for the type of business developed by the company, and Copies of the financial statements must be forwarded to the partners at necessary for the company’s operational activities. least 30 days prior to the annual meeting. Any amount paid in connection with any illegal activity is not deduct- ible. This non-deductibility includes penalties imposed by the authorities Fiscal board owing to a lack of compliance with any law or obligations. The responsibilities of the fiscal board include, among others, the duty to: • inspect the acts of management to ensure compliance with the law and the by-laws,
42 Getting the Deal Through – Anti-Corruption Regulation 2015 TozziniFreire Advogados BRAZIL
Domestic bribery 26 Travel and entertainment 22 Legal framework Describe any restrictions on providing domestic officials with gifts, travel expenses, meals or entertainment. Do the Describe the individual elements of the law prohibiting bribery restrictions apply to both the providing and receiving of such of a domestic public official. benefits? Two main statues account for administrative and judicial sanctions for cor- rupt acts. Administrative sanctions are ruled by the Clean Companies Act There are no general rules governing the conduct of public officials. The and judicial sanctions are ruled by the Administrative Improbity Act (Law federal government, federal district, and the various states and munici- No. 8,429/1992). palities are entitled to enact their own regulations on public officials’ ethics In addition, individuals involved in corrupt practices can also be crimi- and conduct rules. Any regulation in this regard shall abide by the Brazilian nally liable under the Brazilian Criminal Code, irrespective of being the Constitution. The rules vary according to the public entity to which the person who paid the bribe or the public official who received it. public official is bound. Therefore, private companies willing to give benefits, hospitalities, gifts or make any type of payment to public officials 23 Prohibitions must check the rules applicable to the relevant public official. As a rule, public officials are not allowed to receive any kind of finan- Does the law prohibit both the paying and receiving of a bribe? cial aid, award, gratification, commission, donation or advantages on any Yes. Administrative and civil liabilities of companies for the practice of matter. corruption acts are ruled by the Clean Companies Act and sanctions With respect to public officials working for the federal government, relating to public officials involved in corrupt practices are ruled by the there are some ethics and conduct rules with regard to gifts, hospitalities, Administrative Improbity Act. accommodation, transportation, invitations for events, dinners, among Moreover, the Brazilian Criminal Code sets forth penalties for individ- other types of benefits. The federal government also set up an Ethics uals who offer or promise undue advantages to public officials (article 333) Commission, which regulates such benefits and provides guidance to and for public officials who request or receive undue advantages as result public officials. Although these ethics and rules of conduct do not apply to of the public office (article 317). state and municipal public officials, they could be considered as a guidance for rules regulating benefits offered to public officials. 24 Public officials There are also specific gift rules applicable to high-level officials. The High-Level Officials Code of Conduct forbids, for instance, high- How does your law define a public official and does that level public officials from receiving salary or any other remuneration of a definition include employees of state-owned or private source, as well as transport, accommodation or any favours from state-controlled companies? private entities, since such conduct could put the public officials’ probity in doubt. In Brazil, the concept of public official is broad. The Conflict of Interests Law (Federal Law No. 12,813 of 16 May 2013, The concept of public officials include public employees from all which came into force on 1 July 2013) defines what should be understood bodies and entities of the direct and indirect Public Administration, within as conflict-of-interest for public officials of the Federal Executive Branch, the three levels of the Brazilian Federation, which include public employ- as well as public officials who have access to privileged information, which ees working for regulatory agencies, public foundations, government could bring economic or financial benefit to such official or to third parties. agencies, public consortia, as well as public employees working for public Such public officials are prevented from accepting gifts from anyone companies and mixed-capital companies and employees of state-owned interested in decisions to be issued by them or by the collective body to or state-controlled companies. which they belong. It also includes those individuals who hold high level positions in the In addition, such public officials are also prohibited from accepting federal, state and municipal governments: the President, Vice-President, gifts of any value whenever the gift is given by an individual, company or state governors, vice-governors, city mayors, vice-mayors, ministries, state entity that maintains commercial relationships with the body to which the secretaries, municipal secretaries, as well as presidents and directors of public official belongs, among other cases. mixed-capital companies and public companies. The Conflict of Interest Law is to be further regulated by a Presidential For the purposes of ethic violations, any individual working for a Decree which has yet to be enacted. Therefore, as of now, the parameters public body or entity is considered a public official, regardless of whether on what may be considered as illegal gifts or gratuities can also be found in such individual receives a salary or not, or holds temporary positions (such the High-Level Officials Code of Conduct. as jurors). 27 Gifts and gratuities 25 Public official participation in commercial activities Are certain types of gifts and gratuities permissible under your Can a public official participate in commercial activities while domestic bribery laws and, if so, what types? serving as a public official? As explained in question 26, in addition to the federal public officials, vari- As a general rule, a public official may not participate in commercial activi- ous states and municipalities have enacted their own regulations on public ties while serving as a public official. officials’ ethics and conduct rules. Public officials working for the federal government are not allowed to Generally speaking, complementary gifts or promotional materials participate in the management of private companies, either incorporated are allowed, provided they do not exceed the established threshold of 100 or unincorporated. They may be shareholders of private companies. reais (in most of cases). The Code of Conduct of High-Level Federal Public Administration However, it should be noted that the line between courtesy and brib- Officials (High-Level Officials Code of Conduct) also prohibits high-level ery is a grey area. The circumstances, periodicity and the value involved public officials (such as ministers, secretaries of state, presidents of regu- should be carefully considered and, for this reason, each situation requires latory agencies, among others) to practice commercial activities, or any a case-by-case analysis. other activities conflicting with their public functions. In addition, high-level public officials who hold equity interest higher 28 Private commercial bribery than 5 per cent in mixed-capital companies, financial institution or in com- panies which have business with the Public Administration, must keep this Does your country also prohibit private commercial bribery? information publicly available in order to avoid a conflict of interests. There is no specific legislation prohibiting private commercial bribery. Provided that the regulations are sparse and vary for federal, state The bill of law of the new Criminal Code, however, intends to define the and municipal levels, each situation should be analysed on a case-by-case conduct of commercial bribery as a crime. basis. Nowadays, however, the conduct related to the payment of kickbacks may characterise other crimes to be assessed and defined on a case-by- case basis.
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Update and trends The approval of the Clean Companies Act (Law No. 12,846/2013) in parameters of compliance programmes will be established by regulation force as of 29 January 2014 has strongly contributed to highlighting to be issued from the Federal Executive Branch. the importance of the adoption of compliance programmes by the Despite the concern on the still low level of enforcement of foreign companies in order to prevent and detect violations of law, and to bribery, Brazil’s Phase 3 Report on implementing the OECD Anti- implement anti-corruption controls to minimise risks in their respective Bribery Convention also notes positive developments: in addition to businesses. enacting the Clean Companies Act, Brazil has also increased its use of One of the key elements of the Clean Companies Act is the strict mutual legal assistance in foreign bribery cases. liability of legal entities in the civil and administrative levels, for acts It is important to clarify that the OECD report refers only to cases of corruption committed in their interest or benefit. Therefore, the involving bribery of foreign public officials. Unfortunately, only a few company can be held liable regardless of the liability of the individuals cases of foreign bribery have been reported to date. involved, without the need to prove that the management or directors However, it seems that this scenario is already changing. The Clean had a corrupt intent. Companies Act has granted the Office of the Comptroller General with It could be argued that the Clean Companies Act came as an exclusive jurisdiction to investigate bribery of foreign officials. The additional incentive for companies to invest in the adoption of higher Office of the Comptroller General has prepared itself for this new role ethical values and standards, since the existence of compliance and has been exchanging information with other countries to learn from programmes will be considered as a mitigating factor by the government their experience. Therefore, an increase in the enforcement of such when applying the administrative sanctions. But the evaluation violations is expected within the next couple of years.
29 Penalties and enforcement 31 Recent decisions and investigations What are the sanctions for individuals and companies violating Identify and summarise recent landmark decisions and the domestic bribery rules? investigations involving domestic bribery laws, including any investigations or decisions involving foreign companies. The practice of corruption could lead to sanctions of administrative and judicial nature. Administrative penalties are ruled by the Clean Companies Two cases stand out in this respect: the Mensalão (bi-monthly allowance) Act and judicial penalties are ruled by the Administrative Improbity Act case and the alleged corruption at Petrobras. and the Clean Companies Act as well. Mensalão, the biggest judgment that the Brazilian Supreme Court has As regards penalties under the Administrative Improbity Act, a com- ever dealt with, also known as Criminal Case 470, was a scheme in which pany might be prevented from contracting with public bodies for up to 10 politicians from coalition parties were given large payments each month years. Another important sanction would be the inaccessibility to fiscal or in order to buy their support and ensure they would vote in line with the credit benefits and incentives by public bodies, such as the Brazilian Bank Workers Party (Partido dos Trabalhadores or PT). The defendants, poli- for Social and Economic Development. ticians and executives, faced a range of charges including corruption, The sanctions for domestic and foreign bribery are the same. Please embezzlement, conspiracy, money-laundering and misusing of public refer to the answer to question 15. funds. Twenty-five out of 40 defendants were convicted of crimes. The Brazilian Criminal Code sets forth different conducts that are With respect to the main effect of this case, it could be argued that the considered corruption. Penalties for the different types of corruption range Mensalão scandal represented a turning point in how Brazilian citizens and from one to 12 years and a fine. If the public official is actually influenced by courts see and deal with corruption. the undue advantage and violates his duties, the penalty will be increased The alleged corruption at Petrobras, meanwhile, put the Brazilian by one-third, which means that the maximum penalty can go up to 16 years. state-run oil company at the centre of a scheme of money-laundering and payments of briberies involving the company’s contracts. Several 30 Facilitating payments investigations have been conducted by many public authorities, such as Have the domestic bribery laws been enforced with respect to the National Congress, the Federal Police, the Securities and Exchange facilitating or ‘grease’ payments? Commission of Brazil, the Office of the Comptroller General and Public Prosecutor’s Office. Facilitating or grease payments are prohibited and considered a bribe Alongside the Brazilian investigation, Petrobras is also under investi- under the Brazilian law. Therefore, any payment made to a public official gation by the US Securities and Exchange Commission owing to alleged to expedite or secure the performance of a routine governmental action is violations of the Foreign Corrupt Practices Act, since the company trades considered a bribe under Brazilian laws. stocks on the New York Stock Exchange.
Shin Jae Kim [email protected] Renata Muzzi Gomes de Almeida Juliana Sá de Miranda Cláudio Coelho de Souza Timm
Borges Lagoa Street 1328 Tel: +55 11 5086 5000 Vila Clementino Fax: +55 11 5086 5555 São Paulo tozzinifreire.com.br Brazil 04038-904
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Cameroon
Philip Forsang Ndikum Ndikum Law Offices
1 International anti-corruption conventions Felonies and misdemeanours which are not directed against any kind To which international anti-corruption conventions is your of government shall be considered as common law offences and may justify extradition. country a signatory? Cameroon ratified the United Nations Convention against Corruption Offences of universal jurisdiction provided by international conventions (UNCAC) on 6 February 2006. and ratified by Cameroon shall be considered as ordinary law offences. Cameroon appended its signature to the African Union Convention Accordingly, both international Conventions ratified by Cameroon on Prevention and Combating Corruption on 30 June 2008, but has yet to and national laws dealing with corruption are punished similarly. ratify the convention. Cameroon ratified the United Nations Convention against CONAC Transnational Organized Crime on 6 February 2006. The National Anti-Corruption Commission (CONAC) was created by The Cooperation agreement between the French Central Service for Decree No. 2006/088 of 11 March 2006 to fight corruption. the Prevention of Corruption (SCPC) was signed on 11 December 2011 in Yaounde. Finance Law No. 2003/004 on bank confidentiality was passed on 21 April 2003 but 2 Foreign and domestic bribery laws may be overridden in the event of investigations by customs, courts, staff Identify and describe your national laws and regulations of the treasury who are under oath and financial institutions investigating prohibiting bribery of foreign public officials (foreign bribery fraud and matters in connection with embezzlement and corruption. Specifically, article 25 of the Economic and Monetary Community laws) and domestic public officials (domestic bribery laws). of Central Africa (CEMAC) Rules and Regulations No. 01/03/CEMAC/ The Constitution of Cameroon, article 66, stipulates that civil servants UMAC of 14 April 2003, relating to the prevention and repression of shall declare their assets and property at the beginning and at the end of money-laundering and financing of terrorism in Central Africa (Central their tenure of office. African Action Group against Money-Laundering – GABAC), is used to fight corruption. Penal Code The Penal Code, otherwise known as Law No. 67-LF-1 of 12 June 1967, has NAFI various sections that squarely address the endemic corruption that is eat- The National Agency for Financial Investigations (NAFI) was created by ing Cameroon like cancer. The Penal Code identifies and punishes several decree No. 2005/187 of 31 May 2005. NAFI is operational and has a part- forms of corruption. These forms are bribery, indulgence, undue demand, nership agreement with CONAC. Upon request from CONAC, therefore, compulsion of public servant, procuring influence, misappropriation of NAFI can transmit information in connection with suspect bank transac- public funds and corruption of employees, discussed below: tions. This information is instrumental in fighting corruption, especially • section 134 punishes the bribing of anyone, whether a public servant or embezzlement of funds. not; • section 135 punishes civil servants who take or accept any interest, Auditor-General direct or indirect in any grant, contract or selection of tenders subject Cameroon has two supreme audit institutions. The Superior State Audit to his opinion or which he supervised, controlled, administered or is a ministry under the Presidency of the Republic (Ministry Delegate drew up; to the Presidency of the Republic in charge of Supreme State Control • section 137 deals with the offence of indulgence and punishes a public (CONSUPE)) governed by the decree on the organisation of the govern- servant who grants exemption from any fee, due, duty, tax or contribu- ment of 8 December 2004 that controls and drafts financial audits on the tion, or delivers any produce at a lesser price than that prescribed; use of public funds by public bodies, regions, associations and professional • section 142 creates and punishes the crime of undue demand; organisations. The observations and recommendations of the audits are • section 160 deals with compulsion of public servant and punishes submitted to the President who can ask for investigations and prosecution whoever by interference or threat procures a public servant improp- of financial impropriety. Moreover, the Superior State Audit certifies public erly to perform or refrain from any act of his office; accounts and examines them according to current law and submits them • section 161 deals with and punishes procuring influence, namely traf- to the Court of Auditors for a judgment within three months of the close ficking in influence or peddling influence; of the fiscal year. • section 184 deals with the misappropriation of public funds by anyone, The Court of Auditors of the Supreme Court was created by Law whether public servant or not; and No. 2003/005 to review accounts of certified public and other practising • section 312 deals with corruption of an employee. accountants, carries out compliance audits and has established a com- mission to examine accounts and documents. The findings and recom- Criminal Procedure Code mendations of the commission are forwarded in a confidential report to Part XI (sections 642 to 675) of the Cameroon Criminal Procedure Code, the President of the Republic and to the presidents of the Senate and the promulgated by Law No. 2005/007 of 27 July 2005, is dedicated to extradi- National Assembly. The President of the Republic can ask for investiga- tion. Section 642 (2) of the Criminal Procedure Code states: tions and prosecution for corrupt practices.
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Public procurement any person to embezzle more than 50 million CFA francs punishable under A new Public Contract Code was passed in September 2004, which the Penal Code and international conventions ratified by Cameroon. replaced three decrees from 1995 and 2002. The code regulates public tendering and has provisions that ensure objectivity; among them are the 7 Payments through intermediaries or third parties requirements that bidders are anonymous, limits on the use of mutual In what circumstances do the laws prohibit payments through agreement and special markets procedures, maintenance of accounting intermediaries or third parties to foreign public officials? documents. Companies found guilty of corruption will be given a two-year suspension from public contracts. The Public Contract Code has provisions that ensure objectivity requiring that bidders remain anonymous, which limits the use of mutual agreement Special Criminal Court and special markets procedures with employees, civil servants, ministers The Special Criminal Court, created by Law No. 2011/028 of 14 December or relevant personnel, thus prohibiting payments through any kind of 2011, modified and completed by Law No. 2012/011 of 16 July 2012, has intermediaries. powers to prosecute embezzlers and suspects involved in corrupt practices The Penal Code in its various sections also prohibits any payments involving sums upward of 50 million CFA francs, with discretion to clear that can be considered as a bribe or made to corrupt and is broad enough individuals found guilty of corruption and embezzlement of public funds to include anyone, thus intermediaries or third parties can be prosecuted if they repay the money. either as principals or accomplices.
Foreign bribery 8 Individual and corporate liability 3 Legal framework Can both individuals and companies be held liable for bribery of a foreign official? Describe the elements of the law prohibiting bribery of a foreign public official. The criminal law is broad enough to include persons and corporate bodies. However, strictly speaking, individuals are either fined or given a jail sen- Section 134 (a)(1) punishes anyone, whether a public servant or not who tence, while a company can only be held vicariously liable. makes promises, offers, gifts or presents or yields to requests liable to result Under the Public Contract Code any company found guilty of corrup- in corruption in order to obtain either the performance, postponement or tion will be given a two-year suspension from public contracts. abstention from an act or one of the favours or benefits, with imprisonment for from five to 10 years and with a fine of from 200,000 to 2 million CFA 9 Civil and criminal enforcement francs, and section 134 (a)(2) states that whoever makes gifts and presents or yields to requests for the remuneration of an act which has or has not Is there civil and criminal enforcement of your country’s been performed shall be punished in like manner. foreign bribery laws? Section 160 deals with compulsion of a public servant and punishes The law courts undertake civil and criminal enforcement of persons and whoever by interference or threat procures a public servant improperly to companies in that they have powers to investigate and prosecute cases perform or refrain from any act of his office. through the State Counsel’s Office and render decisions in civil cases, Section 161 deals with and punishes procuring influence, ie, trafficking awarding damages for relief, and may impose jail terms or fines in criminal in influence or peddling influence. matters. Section 184 deals with the misappropriation of public funds by anyone, The Special Criminal Court prosecutes any person who embezzles whether public servant or not. more than 50 million CFA francs, an offence punishable under the Penal Code and international conventions ratified by Cameroon. 4 Definition of a foreign public official Any company found guilty of corruption will be given a two-year sus- How does your law define a foreign public official? pension from public contracts under the Public Contract Code. Under Cameroon legislation there is no definition of foreign public official. 10 Agency enforcement However, Cameroon ratified UNCAC in 2006. Article 45 of the Constitution of Cameroon states that duly approved or ratified treaties, agreements What government agencies enforce the foreign bribery laws and international agreements shall, following their publication, override and regulations? national laws. A combination of UNCAC and the Constitution permits The Criminal Procedure Code has provisions that govern preliminary Cameroon to adopt the definition under UNCAC, which is as follows: investigations, which allows such crimes to be investigated by the police and gendarmerie in conjunction with the investigating magistrate or state ‘Foreign public official’ shall mean any person holding a legisla- counsel. tive, executive, administrative or judicial office of a foreign country, The courts are also active in enforcing laws against bribery and whether appointed or elected; and any person exercising a public corruption. function for a foreign country, including for a public agency or public Other government agencies include the ministry dedicated to gov- enterprise. ernment procurement and the Superior State Audit, a ministry under the Presidency of the Republic (Ministry Delegate to the Presidency of the 5 Travel and entertainment restrictions Republic in charge of Supreme State Control (CONSUPE)). To what extent do your anti-bribery laws restrict providing The Court of Auditors of the Supreme Court is governed by Law foreign officials with gifts, travel expenses, meals or No. 2003/005. It has established a commission to examine accounts and entertainment? documents. The findings and recommendations of the commission are forwarded in a confidential report to the President of the Republic and to See question 3. the presidents of the Senate and the National Assembly. The presidency might decide to send such reports to an investigating magistrate for pros- 6 Facilitating payments ecution if there is strong enough evidence of bribery, corruption and or Do the laws and regulations permit facilitating or ‘grease’ embezzlement. payments? 11 Leniency Such payments are forbidden under the Penal Code and the Public Contract Code (PCC) regulating public tendering passed in September Is there a mechanism for companies to disclose violations in 2004, replacing three decrees from 1995 and 2002. Any company found exchange for lesser penalties? guilty of corruption under the PCC will be given a two-year suspension The Special Criminal Court removes charges from individuals found guilty from public contracts. of corruption and embezzlement of public funds if they repay the money. The Special Criminal Court created by Law No. 2011/028 of 14 December 2011, modified and completed by Law No. 2012/011 of 16 July 2012, creates a criminal offence if facilitating or ‘grease’ payments enabled
46 Getting the Deal Through – Anti-Corruption Regulation 2015 Ndikum Law Offices CAMEROON
12 Dispute resolution administrative control of the state or in which the state holds directly or Can enforcement matters be resolved through plea indirectly the majority of the shares. The penalties prescribed vary accordingly to the value of the property. agreements, settlement agreements, prosecutorial discretion Where the value of the property is more that 500,000 CFA francs, the or similar means without a trial? penalty is life imprisonment. Where the value of property is 500,000 CFA Plea agreements were introduced during the creation of the Special francs or less but more than 100,000 CFA francs the penalty is imprison- Criminal Court, which was tested recently. A succinct example is that of ment from 15 to 20 years. Where the value of the property is 50,000 CFA the former Minister for Basic Education, Haman Adama, who had been in francs or less the penalty is imprisonment from five to 10 years and a fine detention since January 2010 for stealing 212 million CFA francs, and had from 50,000 to 500,000 CFA francs. irregularly awarded government contracts in her ministry between 2005 The same section provides that the penalty in case of mitigating cir- and 2006, who had all the charges and those of 10 co-accused dropped cumstances may not be reduced below 10 years, five years or two years and after she refunded all the stolen money worth 369 million CFA francs fol- its execution may not be suspended. Section 184(4) provides that the court lowing the approval of the Justice Minister, Laurent Esso. The law empow- may order any form of confiscation of any property, moveable or immove- ers the Minister of Justice to recommend dropping corruption charges able, belonging to the offender, and attached, which is the proceeds of the against high-profile state officials if stolen funds are repaid in full. The offence. Besides this, the law stipulates that the trial judge must order the Special Criminal Court additionally ruled that former minister Adama and publication of the judgment and impose certain forfeitures on the offender, her co-accused were barred from holding any public office for five years. such as: • removal and exclusion from any public service, employment or office; 13 Patterns in enforcement • incapacity to be a juror, assessor, expert, referee or sworn expert; • incapacity to be guardian, curator, deputy guardian or committee save Describe any recent shifts in the patterns of enforcement of the of the offender’s own children or member of a family counsel; foreign bribery rules. • prohibition on wearing any decoration; The traditional law courts seem to have been unsophisticated in prosecut- • prohibition on serving in the armed forces; and ing and punishing breaches of foreign bribery rules. • prohibition from running a school, on teaching in any educational As a result, the National Anti-Corruption Commission (CONAC) was establishment, and in general on holding any post connected with the created by Decree No. 2006/088 of 11 March 2006 to fight corruption. education or care of children. The National Agency for Financial Investigations (NAFI) was created by Decree No. 2005/187 of 31 May 2005. Export privileges can be cancelled if they are linked to a crime. NAFI is operational and has a partnership agreement with CONAC. Upon request from CONAC, therefore, NAFI can transmit information in 16 Recent decisions and investigations connection with suspected bank transactions. Identify and summarise recent landmark decisions or CONAC is invested with mechanisms to fight corruption, albeit investigations involving foreign bribery. through a reporting system managed directly by the President of the Republic, who in turn can use that information to trigger investigations In the ‘Albatross Affair’, where the culprits purchased an ageing Boeing into corrupt practices and instigate charges against suspects. 767 in 2004 to use as Paul Biya’s presidential plane, former Prime Minister But since white-collar criminals have grown an appetite for pilfering Inoni Ephraim, along with his co-accused Jean Marie Atangana Mebara, a huge sums of money, the Special Criminal Court was created to replace former secretary-general at the Presidency of the Republic of Cameroon, the traditional courts in prosecuting and sentencing individuals who have are each serving a hefty jail term of 20 years, and the judge ordered them been involved in corruption and embezzlement involving 500 million CFA to pay a fine of US$175,000. francs and above. The former premier was board chairman of Standard Chartered Bank The Criminal Procedure Code has in its armoury robust provision where he facilited financial transactions, during which time he is alleged to extradite individuals and put them on trial in Cameroon if they have to have swindled US$2,841,521 from the state in a separate charge from committed crimes involving bribery and corruption in Cameroon or such a surplus on US$8,128,540 disbursed by SNH (National Hydrocarbons serious allegations compromise Cameroon interests even if committed Corporation) to CAMAIR as payment of arrears for aircraft leased from overseas. Ansett Worldwide, an American company. In connection with the Albatross Affair the same court sentenced ex- 14 Prosecution of foreign companies minister Marafa Hamidou Yaya, a former secretary-general at the presi- dency, and his co-accused Yves Michel Fotso, the son of a multi-billionaire, In what circumstances can foreign companies be prosecuted Victor Fotso, to 25 years in jail on corruption charges for stealing millions of for foreign bribery? dollars destined as down payment for the presidential aircraft. Traditionally the Penal and the Criminal Procedure Codes have provisions The total amount stolen in this saga is evaluated at about 25 billion to prosecute individuals for foreign bribery and even extradite individuals CFA francs. from other countries to face trial in Cameroon, but companies can only be In August 2013 the Special Criminal Court imposed a 20-year jail held vicariously liable. term on Olanguena Awono for acting in complicity to embezzle the sum Specifically, the Public Contract Code regulating public tendering was of over 80 million CFA francs in an unexecuted public contract to supply passed in September 2004, replacing three decrees from 1995 and 2002. treated mosquito bed nets to the Malaria Control Programme in 2004, Accordingly, any company found guilty of corruption will be given a two- and acquitted Drs Chia Rose, Maurice Feuzeu, Hubert Wang and Okalla year suspension from public contracts. Abodo. Justice Francis Moukoury sentenced to life imprisonment the manager of Vision Sarl Company, Nsoe Mbella Yves Rodrigues, for fraudu- 15 Sanctions lently obtaining payment of the 80 million CFA francs without supplying the mosquito bed nets, while the former stores accountant in Olanguena’s What are the sanctions for individuals and companies violating cabinet, Onana Belibi Timothé, received a 10-year jail term for facilitating the foreign bribery rules? the payment of the unexecuted contract. Under the Public Contract Code any company found guilty of corruption These persons were tried for embezzling 287 million CFA francs will be given a two-year suspension from public contracts. destined for different programmes funded by government, the Global The sentencing guidelines under the Penal Code range from two to Fund and the World Bank to fight AIDS, malaria and tuberculosis between five years’ imprisonment, with fines ranging from 50,000 to 2 million CFA 2002 and 2006. francs, depending on the crime. The Penal Code section 184 prohibits any person (not only civil serv- ants) who by any means takes or keeps dishonestly any property, move- able or immoveable, belonging to, in transmission to or entrusted to the state, or to any authority or corporation either public or subject to the
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Financial record keeping often imprisons suspects to lengthy jail terms of more than 20 years, with orders to repay the entire monies, since damages as relief are rarely consid- 17 Laws and regulations ered in the criminal courts in Cameroon, and even when a judge considers What legal rules require accurate corporate books and records, this option it is often insignificant. effective internal company controls, periodic financial If the bribery involves forgery under section 314 of the Penal Code statements or external auditing? the punishment shall be imprisonment for five to 10 years and a fine of 100,000 to 2 million CFA francs. The OHADA Uniform Act of 24 March 2000 (Uniform Act Organising and If the charge involves forgery of an official act under section 144 of the Harmonising Undertakings’ Accounting Systems in the Signatory States Penal Code the perpetrator shall be punished with imprisonment from 10 to the Treaty on the Harmonisation of Business Law in Africa), to which to 20 years. Cameroon is a signatory, provides regulations on proper accounting for In cases involving false expert reports the Penal Code prescribes that companies generally. where the false witness has received any gift or accepted any promise, any The law on banking and microfinance in CEMAC to which Cameroon penalty of limited duration and any fine shall be doubled and any gift shall is a signatory requires all banks to keep a proper record of their financial be confiscated. transactions. CIMA, whose member countries are Benin, Burkina Faso, Cameroon, 21 Tax-deductibility of domestic or foreign bribes the Comoros Islands, Congo Brazzaville, Equatorial Guinea, Mali, Niger, Senegal and Togo, is the central insurance supervisory authority in sub- Do your country’s tax laws prohibit the deductibility of Saharan French-speaking African countries. Insurance law in Cameroon is domestic or foreign bribes? governed by the CIMA Insurance Code. Cameroon follows the doctrine of fraus omnia corrupit (fraud negates eve- CIMA sets out the accounting system for insurance companies. Article rything). Consequently, Cameroon has never and will never tolerate bribes 9 on public procurement and management of public finances of UNCAC as a deductible expense under its tax dispensation. states that each state party shall, in accordance with the fundamental principles of its legal system, take appropriate measures to promote trans- Domestic bribery parency and accountability in the management of public finances. Such measures shall encompass, inter alia, procedures for the adoption of the 22 Legal framework national budget, timely reporting on revenue and expenditure, a system Describe the individual elements of the law prohibiting bribery of accounting and auditing standards and related oversight, effective and of a domestic public official. efficient systems of risk management and internal control; and where appropriate, corrective action in the case of failure to comply with the The Constitution of Cameroon, article 66, stipulates that civil servants requirements established in this paragraph. Each state party shall take shall declare their assets and property at the beginning and at the end of such civil and administrative measures as may be necessary, in accordance their tenure of office. with the fundamental principles of its domestic law, to preserve the integ- rity of accounting books, records, financial statements or other documents Penal Code related to public expenditure and revenue and to prevent the falsification The individual elements in the Penal Code are: of such documents. • section 134 punishes the bribing of anyone, whether a public servant of not; 18 Disclosure of violations or irregularities • section 135 punishes civil servants who take or accept any interest, To what extent must companies disclose violations of anti- direct or indirect in any grant, contract or selection of tenders subject to his opinion or which he supervised, controlled, administered or bribery laws or associated accounting irregularities? drew up; Under OHADA a person or business entity running a business must keep • section 137 deals with the offence of indulgence and punishes a public proper accounts for transparency purposes. To facilitate accounting under servant who grants exemption from any fee, due, duty, tax or contribu- OHADA the provisions are divided into general provisions, accounting sys- tion, or delivers any produce at a lesser price than that prescribed; tem, annual accounts, rules on the assessment and setting-up of the trad- • section 142 creates and punishes the crime of undue demand; ing results, value of documents as evidence, accounts auditing, gathering • section 160 deals with compulsion of public servant and punishes and publication of accounting information. whoever by interference or threat procures a public servant improp- OHADA requires the keeping of consolidated and combined accounts erly to perform or refrain from any act of his office; depending on the company structure. • section 161 deals with and punishes procuring influence, ie, trafficking There is a penal provision in place to sanction entrepreneurs and com- in influence or peddling influence; pany directors who do not keep proper accounts. Keeping good accounting • section 184 deals with the misappropriation of public funds by anyone, systems promotes transparency and can reveal irregularities in connection whether public servant or not; and with corrupt practices. • section 312 deals with corruption of an employee. In any event, under OHADA the internal auditor must report any irregularities to the board of directors and company directors have been Criminal Procedure Code jailed following such reports in Operation Sparrow Hawk, which is widely Part XI (sections 642 to 675) of the Cameroon Criminal Procedure Code is used at the moment to jail perpetrators of corrupt practices in Cameroon. dedicated to extradition. Section 642 (2) of the Criminal Procedure Code states: 19 Prosecution under financial record keeping legislation Are such laws used to prosecute domestic or foreign bribery? Felonies and misdemeanours of which are not directed against any kind of government shall be considered as common law offences and The OHADA law makes it clear that entrepreneurs and directors of com- may justify extradition. panies will be held responsible and prosecuted for failing to keep proper Offences of universal jurisdiction provided by international conven- accounts. tions and ratified by Cameroon shall be considered as ordinary law offences. 20 Sanctions for accounting violations What are the sanctions for violations of the accounting rules Accordingly, both international Conventions ratified by Cameroon and associated with the payment of bribes? national laws dealing with corruption are punished similarly.
Under OHADA, if impropriety is included in the auditor’s report, it CONAC becomes an offence to be prosecuted by the traditional courts and since The National Anti-Corruption Commission (CONAC) was created to fight usually white-collar fraudsters (persons or company directors, domestic corruption by undertaking investigations of any nature including bribery or foreign, accused of bribery) steal amounts upwards of 50 million CFA and forwarding such investigations to the President of the Republic, where francs, they are prosecuted before the Special Criminal Court. This court
48 Getting the Deal Through – Anti-Corruption Regulation 2015 Ndikum Law Offices CAMEROON a determination will be made whether to prosecute. A key element is the the Bureau of the Senate, Members of Parliament, Senators, all hold- act of being bribed or being corrupt, which is often verified in company ers of an elective office, Secretaries General of Ministries and persons auditors’ reports in this instance. ranking as such, Directors of the Central Administration, General Managers of public and semi-public enterprises, Judicial and Legal NAFI Officers, administrative personnel in charge of the tax base, collection The NAFI is now operational and has a partnership agreement with and handling of public funds, all managers of public votes and prop- CONAC. Upon request from CONAC, therefore, NAFI can transmit erty, shall declare their assets and property at the beginning and at the information in connection with suspect bank transactions, which exposes end of their tenure of office. impropriety. The other categories of persons to whom the provisions of this article shall Public procurement apply and the conditions of implementation thereof shall be determined by In 2011, the government created a new ministry dedicated to government law. It follows that a civil servant of any category working for any govern- procurement, thus taking over the responsibility of awarding contracts ment department under the public service governed by Decree No. 94/199 from the Prime Minister. The ministry has full power to monitor and of 7 October 1994 is a public official. control government contracts. Any company found guilty of corruption will be given a two-year suspension from public contracts. 25 Public official participation in commercial activities Article 9 on public procurement and management of public finances Can a public official participate in commercial activities while of UNCAC states that each state party shall, in accordance with the funda- serving as a public official? mental principles of its legal system, take appropriate measures to promote transparency and accountability in the management of public finances. Article 38 of Decree No. 94/199 of 7 October 1994 prohibits public serv- Such measures shall encompass, inter alia procedures for the adoption ants from having interests in any commercial activity that will put them in of the national budget, timely reporting on revenue and expenditure, a a conflict of interest and compromise their independence. A public servant system of accounting and auditing standards and related oversight, effec- may do so if the commercial activity does not undermine his or her inde- tive and efficient systems of risk management and internal control; and, pendence, but the public servant must make a relevant declaration of his where appropriate, corrective action in the case of failure to comply with commercial activities to his minister and to the Minister of Public Service the requirements established in this paragraph. Each state party shall take so that precaution can be taken to help the public servant avoid conflicts such civil and administrative measures as may be necessary, in accordance of interest with his work. Failure to declare such commercial activities with the fundamental principles of its domestic law, to preserve the integ- amounts to professional misconduct. A civil servant will be exempted from rity of accounting books, records, financial statements or other documents such declaration if he buys shares in a public company and a private public related to public expenditure and revenue and to prevent the falsification company that has been privatised, in business in the rural areas, science, of such documents. literary and artistic works including teaching of any kind but in conform- ity with the Prime Ministerial Decree governing lucrative activities by civil Special Criminal Court servants. The Special Criminal Court has powers to clear individuals found guilty Under article 36 of the same decree a public servant has to personally of corruption and embezzlement of public funds if they repay the money. undertake his or her assignment diligently, with probity, in respect of the public good and with utmost responsibility. 23 Prohibitions 26 Travel and entertainment Does the law prohibit both the paying and receiving of a bribe? Describe any restrictions on providing domestic officials Paying and receiving a bribe are prohibited in Cameroon under the Penal with gifts, travel expenses, meals or entertainment. Do the Code, whose prescriptions are wide enough to involve anyone paying or restrictions apply to both the providing and receiving of such receiving bribes. See question 22 for details of the Penal Code’s provisions. benefits? 24 Public officials This is prohibited by the Penal Code in that receipt of gifts of any kind that How does your law define a public official and does that will influence a civil servant in his or her duties is punishable by imprison- ment or a fine. definition include employees of state-owned or state- controlled companies? 27 Gifts and gratuities Article 66 of the Constitution defines a public official to be all inclusive and Are certain types of gifts and gratuities permissible under your to mean: domestic bribery laws and, if so, what types?
The President of the Republic, the Prime Minister, Members of Receipt of gifts of any kind that will influence a civil servant in his or her Government and persons ranking as such, the President and Members duties is punishable by imprisonment or a fine. of the Bureau of the National Assembly, the President and Members of
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The Public Service Code of Conduct prohibits shares that will compro- 30 Facilitating payments mise the independence of a civil servant. Have the domestic bribery laws been enforced with respect to facilitating or ‘grease’ payments? 28 Private commercial bribery Does your country also prohibit private commercial bribery? Payment that is deemed to be a bribe of whatever nature, if the act looks, smells and behaves like corruption, will be punished under the Penal Code Yes. Such perpetrators will be prosecuted. Any company found guilty of if there is strong enough evidence to prosecute the suspect. corruption will be given a two-year suspension from public contracts. 31 Recent decisions and investigations 29 Penalties and enforcement Identify and summarise recent landmark decisions and What are the sanctions for individuals and companies violating investigations involving domestic bribery laws, including any the domestic bribery rules? investigations or decisions involving foreign companies. In relation to sanctions, see question 15 for the relevant sentencing guide- See question 16 for details of the ‘Albatross Affair’ and the mosquito bed lines under the Penal Code. nets case. In relation to enforcement, see question 16 for details of the ‘Albatross Affair’ and the mosquito bed nets case.
50 Getting the Deal Through – Anti-Corruption Regulation 2015 Bennett Jones LLP CANADA
Canada
Milos Barutciski Bennett Jones LLP
1 International anti-corruption conventions that a third party might make or offer a bribe on its behalf, failed to make To which international anti-corruption conventions is your appropriate further inquiry or take remedial action (wilful blindness). The prosecution must also establish the following elements of the country a signatory? actus reus of the offence: a person, in order to obtain or retain business, Canada has signed and ratified the OECD Convention on Combating or to retain or obtain an advantage in the course of business, directly or Bribery of Foreign Public Officials (OECD Anti-Bribery Convention), indirectly gives, offers or agrees to give or offer, a loan, reward, advantage the OAS Inter-American Convention against Corruption and the United or benefit of any kind, to a foreign public official or to any person for the Nations Convention against Corruption (UNCAC). When ratifying the benefit of a foreign public official, as consideration for an act or omission UNCAC and the Inter-American Convention, Canada declared that it by the official in connection with the official’s duties or functions, or to would not create an offence of illicit enrichment as set out in UNCAC induce the official to use his or her position to influence any act or decision article 20 and Inter-American Convention article IX, because such an of the government for which the official performs duties or functions. offence would be contrary to the presumption of innocence guaranteed by The offence contemplates an exchange, or quid pro quo, between the Canada’s constitution. person making the bribe and the official such that the ‘benefit’ is given or offered to the official in order to induce the official to use his or her official 2 Foreign and domestic bribery laws position to the business advantage of the person making the bribe. In R v Karigar [2013] ONSC 5199, the Ontario Superior Court of Justice Identify and describe your national laws and regulations concluded that the use of the word ‘agree’ in the phrase ‘agrees to give prohibiting bribery of foreign public officials (foreign bribery or offer’ imports the concept of conspiracy into the CFPOA, such that an laws) and domestic public officials (domestic bribery laws). agreement by persons to give or offer a bribe to a foreign public official is a Bribery of foreign public officials is prohibited by the Corruption of Foreign violation of the act, whether or not there is proof that the public official was Public Officials Act, SC 1998, c. 34, as amended (CFPOA). The CFPOA offered or received the bribe. makes bribery of a foreign public official a criminal offence. The CFPOA As of June 2013, the CFPOA provides nationality-based jurisdiction for also contains exceptions with respect to offering a benefit to a foreign CFPOA offences committed anywhere in the world by a Canadian citizen, public official that is permitted or required by the local law of the official, or a permanent resident, or a company, partnership or other entity formed or that was made to pay the reasonable expenses of the official in relation to organised under Canadian law. For acts committed prior to 19 June 2013, the promotion, demonstration or explanation of a company’s products, or the date the amendments came into force, the Crown must establish juris- in relation to the execution of a contract with the foreign state. The CFPOA diction by demonstrating a ‘real and substantial connection’ with Canada includes a ‘books and records’ offence, which criminalises the creation or pursuant to the jurisdictional test established by the Supreme Court of maintenance of secret, incomplete or inaccurate books and records for the Canada in R v Libman [1985] 2 SCR 178. Jurisdiction over foreign compa- purpose of engaging in or hiding the bribery of foreign public officials. nies and individuals for the purposes of CFPOA offences must still be estab- Separately, the Criminal Code, RSC 1985, c. C-46, as amended, lished pursuant to the ‘real and substantial connection’ with Canada test. establishes criminal offences that apply to the possession of property or the proceeds of property obtained from the bribery of a foreign public offi- 4 Definition of a foreign public official cial (section 354) and the laundering of property or proceeds of property How does your law define a foreign public official? obtained from the bribery of a foreign public official (section 462.31). Bribery of domestic officials is addressed by the Criminal Code in ‘Foreign public official’ is defined in section 2 of the CFPOA as: sections 119 to 125, dealing with various forms of bribery, corruption, fraud • a person who holds a legislative, administrative or judicial position in a on the Crown and breach of trust by public officials, and also by section foreign state; 426, dealing with secret commissions received by an agent (including a • a person who performs public duties or functions for a foreign state, public official). The Criminal Code offences in relation to possession of including a person employed by a board, commission, corporation or proceeds of crime and laundering of the proceeds of crime apply equally to other body or authority that is established to perform a duty or func- bribery of domestic officials. tion on behalf of the foreign state, or is performing such a duty or function; or Foreign bribery • an official or agent of a public international organisation that is formed by two or more states or governments, or by two or more such public 3 Legal framework international organisations. Describe the elements of the law prohibiting bribery of a foreign public official. 5 Travel and entertainment restrictions To what extent do your anti-bribery laws restrict providing To obtain a conviction under the CFPOA prohibition on bribery of a foreign public official (section 3), the prosecution must prove both the actus reus foreign officials with gifts, travel expenses, meals or (the prohibited act) and mens rea (a guilty mind). entertainment? With respect to the proof of mens rea in this context, there is no The CFPOA does not expressly address gifts, travel expenses, meals or requirement to prove a specific ‘corrupt’ intent. It is sufficient for the entertainment. The giving or offering of any of these items can be viewed prosecution to prove that the accused, having reason to know or suspect as ‘benefits’ so as to trigger the bribery offence provided the other ele- ments of the offence are satisfied, and the exceptions and defences under www.gettingthedealthrough.com 51 CANADA Bennett Jones LLP the CFPOA do not otherwise apply. Moreover, there is no de minimis that a person injured by virtue of the commission of the offence of brib- threshold with respect to the value of the benefits required to trigger the ery of a foreign public official (eg, the injured government or perhaps an offence, although a benefit of a particularly low or nominal value may well injured competitor whose contractual relations with a foreign government be insufficient to satisfy the quid pro quo aspect of the offence. have been interfered with) may be able to sue the offender civilly for dam- ages in tort or delict. However, to date, this approach has not been tested 6 Facilitating payments in Canadian courts. Do the laws and regulations permit facilitating or ‘grease’ 10 Agency enforcement payments? What government agencies enforce the foreign bribery laws Subsection 3(4) of the CFPOA currently provides that a payment ‘made and regulations? to expedite or secure the performance by a foreign public official of any act of a routine nature that is part of the foreign public official’s duties or The right to lay charges under the CFPOA rests exclusively with Canada’s functions’ does not amount to a ‘loan, reward, advantage or benefit’ paid to national police force, the Royal Canadian Mounted Police (RCMP). CFPOA obtain ‘an advantage in the course of business’ such as to trigger the com- offences are investigated by the RCMP’s Sensitive and International mission of the bribery offence. Investigations Section in Ottawa and the Calgary-based K Division (the Subsection 3(4) does not define such ‘acts of a routine nature’, but it successors to the two International Anti-Corruption Teams established by does set out an illustrative list, as follows: the RCMP in 2007). • the issuance of a permit, licence or other document to qualify a person CFPOA offences can be prosecuted by either federal or provin- to do business; cial prosecutors. However, since mid-2012, the RCMP appears to have • the processing of official documents, such as visas or work permits; taken a policy decision to refer CFPOA matters exclusively to the Public • the provision of services normally offered to the public, such as mail Prosecution Service of Canada (PPSC), which represents the federal pick-up and delivery, telecommunications services and power and Crown in criminal prosecutions. We are aware of at least one case that was water supply; and initially handled by a provincial prosecutor that was subsequently trans- • the provision of services normally provided as required, such as police ferred to the PPSC. The PPSC has designated senior counsel to coordinate protection, loading and unloading of cargo, the protection of perish- CFPOA matters and in March 2014 issued a Guideline that emphasised able products or commodities from deterioration, or the scheduling of the importance of coordinating the prosecution of CFPOA offences at inspections related to contract performance or transit of goods. a national level. Consolidation of prosecutions in a single agency should promote capacity-building and consistency in prosecutorial approach, as A decision to award new business, to continue existing business or to well as more efficient case resolution. encourage another person to make such a decision are deemed not to con- Canada has also begun to use alternative administrative measures to stitute an ‘act of a routine nature’ and therefore do not constitute facilitat- promote compliance with anti-corruption laws, including through its pub- ing payments under any circumstances (CFPOA, s. 3(5)). lic procurement policies and services provided to Canadian companies In June 2013, the CFPOA was amended to eliminate this ‘facilitation operating abroad. Since late 2012, the Department of Public Works and payment’ exception, however this change will only come into force at a Government Services (which administers procurement for the federal gov- future date to be determined by the federal Cabinet. ernment) automatically disqualifies companies convicted of an offence under the CFPOA from federal government contracts. In spring 2014, the 7 Payments through intermediaries or third parties Department extended this policy to disqualify companies convicted of brib- In what circumstances do the laws prohibit payments through ery offences in foreign jurisdictions and under foreign laws. In September 2014, the federal government introduced a requirement that Canadian intermediaries or third parties to foreign public officials? companies seeking the assistance of Canada’s trade commissioners abroad The CFPOA prohibits giving or offering payments to an official, directly must declare that they are not engaged in corruption, and specifically or indirectly. The word ‘indirectly’ captures bribes paid or offered through that neither the company nor its affiliates have been charged or convicted intermediaries or third parties, including agents and representatives, as under Canada’s anti-corruption laws. Export Development Canada and the well as persons who are mere conduits for the payment and are not, in any Canadian Commercial Corporation have adopted similar policies. manner, parties to the underlying offence. 11 Leniency 8 Individual and corporate liability Is there a mechanism for companies to disclose violations in Can both individuals and companies be held liable for bribery exchange for lesser penalties? of a foreign official? There is no established way for a company to secure certainty in its crimi- Both individuals and companies can be convicted of the criminal offence of nal exposure in exchange for coming forward and reporting violations. bribery of a foreign public official. The acts or omissions of a ‘senior officer’ A company can approach the RCMP and offer to make disclosure of an (defined in section 2 of the Criminal Code) may give rise to corporate liabil- offence in exchange for leniency. When doing so, it is essential to involve ity under specific circumstances. Pursuant to section 22.2 of the Criminal the federal prosecution service early in the process as any plea agreement Code, a corporation will be deemed to be a party to the offence if the senior will need to be negotiated with and confirmed by the Crown. officer, acting with the intent at least in part to benefit the organisation: The RCMP has made overtures to the private sector and the legal • acts within the scope of his or her authority and is a direct party to the profession expressing an interest in promoting voluntary disclosure offence; and in developing a protocol with respect to the process that would gov- • acts within the scope of his or her authority, has the required mens ern voluntary disclosure. Indeed, the 2013 conviction of Griffiths Energy rea for the offence, and directs a representative of the organisation to International Inc (Griffiths Energy) was the result of a voluntary disclosure commit the actus reus; or that the court acknowledged warranted a reduced fine, and we are aware of • knowing (or, as detailed above, being wilfully blind to the fact) that three other voluntary disclosure matters. Nevertheless, recent experience a representative of the organisation is or is about to be a party to the with voluntary disclosures, including in cross-border cases, have shown offence, fails to take all reasonable measures to stop the representative that the RCMP and the PPSC have yet to establish a consistent and predict- from doing so. able process for voluntary disclosure.
9 Civil and criminal enforcement 12 Dispute resolution Is there civil and criminal enforcement of your country’s Can enforcement matters be resolved through plea foreign bribery laws? agreements, settlement agreements, prosecutorial discretion or similar means without a trial? Bribery of a foreign public official is subject only to criminal enforcement under the CFPOA. Canadian prosecutors do not have a civil enforcement Canadian prosecutors have wide latitude to exercise discretion with option under the CFPOA. In certain circumstances, however, it is possible respect to the disposition of criminal charges. Thus plea agreements are
52 Getting the Deal Through – Anti-Corruption Regulation 2015 Bennett Jones LLP CANADA routinely concluded in relation to many white-collar offences and can the payment to a Bangladeshi energy minister of a luxury vehicle valued include a wide range of penalties and restitution. The 2011 conviction of at C$190,000 and personal travel valued at C$5,000. These payments Niko Resources Ltd (Niko Resources) for bribery of a Bangladeshi minister were allegedly made to obtain the minister’s support in relation to the illustrates the general principle in the context of foreign bribery. In this negotiation of a gas purchase and sale agreement with a state enterprise case, the company pleaded guilty to one count of bribery contrary to the and mitigation of the fallout resulting from a gas blowout at one of Niko CFPOA and was fined C$8.26 million. In addition to the criminal fine, the Resources’s sites in Bangladesh. The company was sentenced to pay a fine court imposed a victim surcharge of 15 per cent for a total monetary pen- of C$8.3 million plus a 15 per cent victim surcharge, for a total penalty of alty of C$9.5 million. The court also issued a probation order for a period of C$9.5 million. three years requiring Niko Resources to report to the RCMP any evidence of In January 2013 Griffiths Energy entered a guilty plea on one count of corrupt payments made by or on behalf of the company, to adopt a robust bribery contrary to the CFPOA and was fined C$9 million plus a 15 per cent anti-corruption compliance policy with elements determined by the court, victim surcharge for a total penalty of C$10.35 million. Griffiths Energy and to retain an independent auditor at the company’s expense to prepare admitted to having paid a C$2 million success fee to a company controlled an annual compliance report to the court, the prosecution and the RCMP. by the wife of the ambassador to Canada of the Republic of Chad in con- To date, only one conviction under the CFPOA has been the result of a trial nection with securing an oil and gas concession in the African country. process (Karigar), which resulted in a sentence of three years’ incarceration. The court took into consideration that the company voluntarily disclosed the matter to the Canadian and US authorities when it came to the atten- 13 Patterns in enforcement tion of new management and cooperated fully in the RCMP investigation. Describe any recent shifts in the patterns of enforcement of the The court’s reasons suggested that the fine would have been considerably higher in the absence of the voluntary disclosure. foreign bribery rules. In June 2013 Nazir Karigar, a Canadian citizen, was found guilty of There have been four convictions under the CFPOA to date: Hydro Kleen bribery under the CFPOA for an agreement to pay bribes to certain offi- Group (2005), Niko Resources (2011), Griffiths Energy (2013) and Karigar cials of Air India and the Indian Minister of Civil Aviation with regard to (2013). The establishment of a dedicated enforcement unit in late 2007, the procurement of an airport security system. In April 2014, Mr Karigar followed by the appointment of dedicated federal prosecutors in Alberta was sentenced to three years’ imprisonment. The Karigar case was the first and Ottawa, were critical enforcement developments that are now show- prosecution under the CFPOA to proceed through a trial on the merits, the ing results. The last report to Parliament on Canada’s implementation of first conviction of an individual under the CFPOA, and the first case to offer the OECD Anti-Bribery Convention in November 2013 disclosed that the judicial interpretation of any of the CFPOA’s provisions. Before Karigar, all RCMP had 36 anti-corruption investigations under way. The RCMP has other CFPOA convictions have been secured through guilty pleas without not publicly disclosed its number of active investigations since 2013. It is trial. In June 2014, the RCMP laid charges against three foreign nationals believed that the number of active investigations now stands at approxi- believed to have assisted in the bribery scheme, and Canada-wide war- mately 40 and includes at least four matters that were brought to the rants for these individuals remain outstanding. attention of the RCMP by means of voluntary disclosure. Enforcement activity continues with respect to SNC-Lavalin Group and The RCMP has executed at least four search warrants in international the World Bank-funded Padma Bridge construction project in Bangladesh, corruption matters and issued numerous production orders under the and public contracts in Libya. In September 2011 the RCMP executed a Criminal Code to financial institutions and other persons with information search warrant at SNC-Lavalin Group’s premises outside Toronto in rela- relevant to ongoing investigations. tion to the Padma Bridge investigation. In 2013, the RCMP charged three former employees of SNC-Lavalin Group (including a former senior vice- 14 Prosecution of foreign companies president), and two other individuals under the CFPOA in connection with the matter. In April 2014, the Ontario Superior Court found that Canada In what circumstances can foreign companies be prosecuted lacked adjudicative jurisdiction over one of these individuals, a Bangladeshi for foreign bribery? national who was not present in Canada and who lacks any citizenship or Foreign companies can be prosecuted under the CFPOA where jurisdiction residency ties to Canada (Chowdhury v HMQ, 2014 ONSC 2635). The can be established pursuant to the ‘real and substantial connection with court found that although Canadian courts may have jurisdiction over Canada’ test established by the Supreme Court of Canada in R v Libman. the offence, unless and until the accused is physically present in Canada or Bangladesh offers to surrender him to Canada, Canadian courts do not 15 Sanctions have jurisdiction over his person. Accordingly, the prosecution against the Bangladeshi national has been stayed, while the prosecution of the three What are the sanctions for individuals and companies violating former employees and one other individual continues. the foreign bribery rules? In April 2013 the World Bank imposed a 10-year debarment on SNC- Individuals are subject to imprisonment for up to 14 years upon conviction Lavalin Inc and over 100 of its affiliates after the company agreed not to of bribery of a foreign public official. A convicted company or other organi- dispute charges arising from the same matter. sation is subject to a fine in the discretion of the court (ie, there is no maxi- Prosecutions and investigations also continue with respect to alleged mum fine set by the CFPOA and a court is free to establish a fine level that payments to third parties relating to public contracts in Libya. In April 2012 is appropriate in the circumstances of the offence). Recently, the Ontario the RCMP executed a search warrant at SNC-Lavalin Group’s headquar- Superior Court commented that ‘the primary objectives of sentencing ters pursuant to a mutual legal assistance request by the Swiss authorities. must be denunciation and deterrence’ (R v Karigar, 2014 ONSC 3093). The Swiss authorities had arrested a former executive vice-president of In the Niko Resources case, the court imposed a total monetary penalty SNC-Lavalin Group for money laundering and corruption and in August of C$9.5 million for one count of bribery involving payment of goods and 2014 reached a plea deal which saw the executive plead guilty in October services valued at approximately C$195,984. In Griffiths Energy, the total 2014 to bribery in exchange for the 29 months of incarceration he served monetary penalty was C$10.35 million for the payment of bribes includ- and an order to repay millions of dollars to SNC. Two weeks later, the ing C$2 million and shares to a corporate entity owned by the wife of the executive was extradited to Canada, where he is expected face prosecution foreign ambassador. In Karigar, the only case to date in which an individual of the domestic corruption charges laid against him in relation to a large has been sanctioned under the CFPOA, Mr Karigar was sentenced to three public construction project in Quebec. In February 2014, the RCMP laid years of imprisonment for conspiring to bribe officials. In all of these cases, charges against a former executive vice-president of construction and a the corporation or individual cooperated with the authorities, and in each former vice-president and financial controller in relation to the Libya cor- case this was noted by the court as a mitigating factor. ruption allegations. In September 2014, the RCMP laid additional charges against the former executive vice-president of construction for obstructing 16 Recent decisions and investigations justice and against a Canadian lawyer for obstructing justice and extortion, alleging that the two men sought to obtain a statement from the former Identify and summarise recent landmark decisions or executive vice-president detained in Switzerland in exchange for money. investigations involving foreign bribery. Several investigations into the company’s activities in Canada and abroad In June 2011 Niko Resources, a Canadian public company in the oil and are ongoing and further enforcement action and charges are anticipated. gas exploration sector, pleaded guilty to one count of bribery in relation to www.gettingthedealthrough.com 53 CANADA Bennett Jones LLP
Financial record keeping 21 Tax-deductibility of domestic or foreign bribes 17 Laws and regulations Do your country’s tax laws prohibit the deductibility of domestic or foreign bribes? What legal rules require accurate corporate books and records, effective internal company controls, periodic financial Yes. Section 67.5 of the Income Tax Act expressly denies the deductibility statements or external auditing? of expenses incurred for the purposes of an offence under section 3 of the CFPOA or the domestic bribery provisions of the Criminal Code. The CFPOA’s books and records offence was established when the legisla- tion was amended in June 2013. Under CFPOA section 4, it is an offence Domestic bribery to keep secret accounts, falsely record, not record or inadequately identify transactions, enter liabilities with incorrect identification of their object, 22 Legal framework use false documents, or destroy accounting books and records earlier than Describe the individual elements of the law prohibiting bribery permitted by law for the purpose of concealing bribery of a public official. of a domestic public official. As a result, CFPOA liability can now flow from conduct relating to the financial records of a corporation made after an alleged corruption offence. The Criminal Code contains several provisions, each with different tests The CFPOA books and records offence is a criminal offence and therefore and elements, addressing various forms of domestic bribery and corrup- subject to a criminal standard of proof. However, from a day-to-day com- tion, as follows: pliance standpoint it can be expected to require the same level of diligence • section 119 addresses bribery of judicial officers and members of in the recording of transactions, or in the face of red flags that give rise to parliament or of provincial legislatures; concerns about potential unlawful payments or efforts to conceal them, • section 120 addresses bribery of law enforcement officials and persons as would be expected of corporate officials under the US Foreign Corrupt employed in the administration of the criminal law; Practices Act. • section 121 addresses fraud on the government and a broad range of More generally, the principal laws and regulations governing corpo- bribery and influence peddling by domestic officials; rate books and records are the Canada Business Corporations Act and • section 122 addresses breaches of trust by public officers; similar provincial corporate statutes, and the provincial securities laws. • section 123 addresses bribery and corruption of municipal officials; Both the corporate and securities laws require that financial statements of and corporations be prepared in accordance with Canadian generally accepted • sections 124 and 125 address the selling or purchasing of public offices accounting principles (GAAP) as set out in the Handbook of the Canadian and attempts to influence or deal in public offices. Institute of Chartered Accountants. As of 2011, Canadian GAAP require public corporations in Canada to comply with the International Financial The core domestic bribery offence, however, is contained in section 121(1) Reporting Standards. In the case of Canadian companies who are ‘regis- (a), which makes it an offence for a person to, directly or indirectly, give, trants’ for the purposes of the US securities laws, they may prepare their offer or agree to give to an official or to a member of his family, or to anyone financial statements in accordance with US GAAP (ie, the principles estab- for the benefit of the official, or for an official to demand accept or offer or lished by the US Financial Accounting Oversight Board). agree to accept, a loan, reward advantage or benefit of any kind as con- sideration for cooperation, assistance, exercise of influence or an act or 18 Disclosure of violations or irregularities omission in connection with any matter of business with the government. In addition to the Criminal Code offences cited above, there are spe- To what extent must companies disclose violations of cific bribery and corruption provisions in many other federal and provin- anti-bribery laws or associated accounting irregularities? cial statutes including, for example, the Royal Canadian Mounted Police There is no such obligation under Canadian law in relation to disclosure of Act with regard to the offence of bribing a member of the RCMP (subsec- the mere fact of bribery, domestic or foreign. Public companies, however, tion 48(1)), the Canada Elections Act in relation to the bribery of a voter have certain obligations under Canadian securities laws to report ‘mate- (section 481), the Financial Administration Act with respect to the bribery rial changes’ and ‘material facts’. In addition, the securities exchanges of officials involved in the collection and disbursement of public money have their own rules with regard to disclosure of material information. As a (section 81), and the Immigration and Refugee Protection Act concerning result of heightened enforcement and rising levels of corporate awareness, paying bribes to immigration officers or government employees (section Canadian companies are reviewing past and contemplated acquisitions 129). Similarly, many provincial statutes include provisions aimed at curb- more closely in order to identify potential exposure under the CFPOA. ing bribery, corruption and influence peddling, particularly in the context Correspondingly, where CFPOA violations are uncovered by these internal of elections or the performance of a legislator’s duties. investigations, there has been a noticeable trend towards voluntary disclo- sures of infractions to the law enforcement authorities, and we are aware 23 Prohibitions of such disclosures in the past. Does the law prohibit both the paying and receiving of a bribe?
19 Prosecution under financial record keeping legislation All but one of the offences relating to domestic bribery and corruption listed in question 22 apply to both the paying and receiving of a bribe. Are such laws used to prosecute domestic or foreign bribery? The offence of breach of trust by a public officer under section 122 of the As noted above, the CFPOA now contains a separate offence for concealing Criminal Code applies only to the public official. Where the breach of trust bribery in an entity’s books and records. There do not appear to have been was induced by a third party through a bribe, however, the payer would be any instances of the use of more general financial record keeping legisla- caught by one of the other domestic bribery offences. tion (ie, corporate and securities statutes and regulations) as a means to prosecute bribery offences, domestic or foreign. 24 Public officials How does your law define a public official and does that 20 Sanctions for accounting violations definition include employees of state-owned or state- What are the sanctions for violations of the accounting rules controlled companies? associated with the payment of bribes? The domestic bribery provisions of the Criminal Code apply to ‘officials’. The books and records provisions under the CFPOA carry a maximum Section 118 of the Criminal Code defines an ‘official’ as a person who holds sentence of 14 years’ imprisonment, or in the case of a company or other an office or appointment under the government of Canada or a province, organisation, a fine in the discretion of the court. a civil or military commission, or a position or an employment in a public department; or is appointed or elected to discharge a public duty. The defi- nition of ‘official’ does not generally extend to state-controlled companies. However, bribery of directors, officers or employees of state-controlled companies would be subject to the ‘secret commission’ offence in section 426 of the Criminal Code.
54 Getting the Deal Through – Anti-Corruption Regulation 2015 Bennett Jones LLP CANADA
25 Public official participation in commercial activities 28 Private commercial bribery Can a public official participate in commercial activities while Does your country also prohibit private commercial bribery? serving as a public official? Yes. Section 426 of the Criminal Code prohibits the payment or offering The domestic bribery and corruption laws do not specifically prohibit pub- of secret commissions to agents (including employees of private entities) lic officials from engaging in independent commercial activities as such. as consideration for the agent doing or forbearing to do any act in relation However, where public officials abuse their position for personal gain or to the affairs or business of the principal, for showing favour or disfavour for the benefit of their personal business, they may be found in violation to any person in relation to the affairs or business of the principal, or using of section 122 of the Criminal Code prohibiting breach of trust. Payments receipts, accounts or other writings with intent to deceive the principal. received by a government official in the course of carrying on an independ- ent business may also violate section 121(1)(c) of the Criminal Code where 29 Penalties and enforcement they are received from a person who has dealings with the government, What are the sanctions for individuals and companies violating unless the official has received the consent of head of their agency or the domestic bribery rules? department. In R v Mathur, a 2007 decision of the Ontario Superior Court affirmed by the Ontario Court of Appeal ([2010] ONCA 311), an employee Bribery of judicial officers and members of parliament or provincial legis- of the National Research Council (NRC) was convicted of both accepting a latures contrary to section 119 of the Criminal Code, and bribery of police benefit from a company that did business with the NRC, and also of breach officers and other officials employed in the administration of criminal law of trust as a result of his business dealings with the company. Moreover, contrary to section 120 of the Criminal Code, are punishable by up to 14 regardless of the potential application of the Criminal Code, officials who years’ imprisonment. engage in independent commercial activities that have a potential relation- Other forms of official corruption and bribery contrary to sections ship to their office or employment risk running afoul of applicable codes 121 (fraud on the government and various forms of influence peddling), of conduct, conflict of interest codes and guidelines, or the terms of their 122 (breach of trust by an official), 123 (bribery of municipal officials), 124 employment or office. (selling and purchasing public offices) and 125 (influencing, negotiating appointments or dealing in public offices) of the Criminal Code are punish- 26 Travel and entertainment able by up to five years’ imprisonment. R v Morency [2012] QJ No. 4860, a decision out of the province of Describe any restrictions on providing domestic officials Quebec, contains a chart of 62 sentences imposed on public officials con- with gifts, travel expenses, meals or entertainment. Do the victed of domestic bribery and corruption charges under Criminal Code. In restrictions apply to both the providing and receiving of the majority of cases, the public official was sentenced to a term of impris- such benefits? onment despite mitigating factors such as no previous criminal conviction Since 2012, public servants employed by ‘core’ government institutions or a history of community service. (such as departments and administrative tribunals) are subject to a Policy on Conflict of Interest and Post- Employment (Conflict of Interest Policy). 30 Facilitating payments Under the Conflict of Interest Policy public servants are not to accept or Have the domestic bribery laws been enforced with respect to solicit any gifts, hospitality or other benefits that may have a real, appar- facilitating or ‘grease’ payments? ent or potential influence on their objectivity in carrying out their official duties and responsibilities or that may place them under obligation to the The domestic bribery laws do not provide any exception for facilitating donor. The Conflict of Interest Policy is complemented by the Values and or ‘grease’ payments. If a payment is made or offered as consideration for Ethics Code for the Public Sector (revised in 2012), which sets out ethical the official to perform even a non-discretionary duty (eg, to expedite the principals applicable to all federal public servants (including employees of performance of the duty), it is potentially subject to being caught by the Crown corporations) except the Canadian forces, the Canadian Security applicable domestic bribery offence. Intelligence Service and the Communications Security Establishment, which are subject to more stringent requirements. Every government 31 Recent decisions and investigations department, agency and corporation also has its own specific code relating Identify and summarise recent landmark decisions and to travel, entertainment and gifts. investigations involving domestic bribery laws, including any Each of the 10 provincial and three territorial governments adminis- investigations or decisions involving foreign companies. ters its own code of conduct with respect to its officials. In 2006, the Supreme Court of Canada issued its most recent decision 27 Gifts and gratuities in a matter of official corruption (R v Boulanger [2006] 2 SCR 49). In this case the Supreme Court clarified a number of outstanding issues regarding Are certain types of gifts and gratuities permissible under your the elements of the offence of breach of trust by a public official in section domestic bribery laws and, if so, what types? 122 of the Criminal Code. Each of the following elements must be proven The Criminal Code provisions on domestic bribery do not contain any safe beyond a reasonable doubt for the offence to be established: harbours or exceptions for gifts and gratuities. If the gift or gratuity, how- • the accused is an official; ever small, can be shown to have resulted in the prohibited influence on the • the accused was acting in connection with the duties of his or her official’s conduct or performance of his or her duties, the offence will be office; made out. However, the judicial decisions regarding domestic bribery have • the accused breached the standard of responsibility and conduct made passing reference to gifts and benefits of a nominal value or quality demanded of him or her by the nature of the office; as being insufficient to be found as a bribery offence (at least in the absence • the conduct of the accused represented a serious and marked depar- of clear evidence linking the gift to the prohibited outcome in relation to ture from the standards expected of an individual in the accused’s the official’s duties or functions). position of public trust; and Separately, the acceptability of gifts and other forms of hospitality is • the accused acted with the intention to use his or her public trust for a generally addressed in federal and provincial codes of conduct for public purpose other than the public good, for example, for a dishonest, par- officials. For example, the federal Conflict of Interest Policy provides that tial, corrupt or oppressive purpose. gifts, hospitality and other benefits are permissible if they are: • infrequent and of minimal value (low-cost promotional objects, In October 2011, the Quebec government established a commission of simple meals, souvenirs with no cash value); inquiry to investigate allegations of bid-rigging and corruption in construc- • arise out of activities or events related to the official duties of the tion contracts awarded by the province and municipalities. The commis- public servant concerned; sion began its work in May 2012 and has heard evidence from witnesses • are within the normal standards of courtesy, hospitality or protocol; in the construction industry and municipal employees describing systemic and corruption in bids for municipal contracts. Testimony has also included • do not compromise or appear to compromise in any way the integrity allegations of illegal political party financing, collusion, and connections of the public servant concerned or his or her organisation. between organised crime and the construction industry in Quebec. www.gettingthedealthrough.com 55 CANADA Bennett Jones LLP
Prosecutions and investigations continue with respect to alleged cor- Update and trends ruption relating to a large public construction project in Canada, the McGill University Health Centre. In March 2012, the SNC-Lavalin Group’s CEO The investigation into various corruption allegations against resigned in connection with the conclusion of an internal investigation that Canadian international construction company SNC-Lavalin Group disclosed that he had approved approximately C$56 million to unnamed has entered into its fourth year and is beginning to move into the prosecutions phase. After the initial search warrant was executed ‘agents’ to help secure two contracts. The former CEO was arrested by in 2011 in connection with the World Bank-funded Padma Bridge, Quebec police in November 2012 and charged in February 2013 with fraud Swiss authorities arrested a former executive vice-president of and conspiracy. As noted above, the former executive vice-president of SNC-Lavalin Group, Riadh Ben Aissa, for money laundering construction has also been charged and awaits prosecution in Quebec. and corruption. Ben Aissa reached a plea arrangement with the Others charged include several former SNC executives (including some Swiss authorities in August 2014 whereby the executive pleaded who have been charged with respect to the Libya investigations), con- guilty in October 2014 to bribery in exchange for the 29 months of sultants, lawyers, and hospital officials, including the former CEO of the incarceration he served and an order to repay millions of dollars Health Centre (currently jailed in Panama and awaiting possible extradi- to SNC. Two weeks later, Ben Aissa was extradited to Canada, tion to Canada). In December 2014, the former Health Centre CEO’s wife where he faces domestic corruption charges in relation to a large public construction project in Quebec. In February 2014, the pleaded guilty to money laundering charges related to the project. RCMP laid charges against a former executive vice-president of In February 2014, the RCMP announced the conclusion of the Project construction and a former vice-president and financial controller COCHE investigations into alleged corruption at the Canada Revenue in relation to the Libya corruption allegations. In September 2014, Agency (CRA). In total, the six-year investigation resulted in the arrest of 15 the RCMP laid additional charges against Ben Aissa for obstructing individuals, including eight former CRA officials, and in the laying of 142 justice and against a Canadian lawyer for obstructing justice and counts of indictment. extortion, alleging that the two men sought to obtain a statement Two judicial decisions have clarified various aspects of Canada’s from Ben Aissa in exchange for money while he was incarcerated domestic bribery laws in areas that could have implications for the CFPOA. in Switzerland. Settlement negotiations between the Canadian In R v Mathur [2010] ONCA 311, the Ontario Court of Appeal confirmed authorities and the SNC-Lavalin Group in relation to the company’s activities in Canada and abroad are ongoing. that payments made to a family member of a government official are suf- ficient to make out an offence under section 121 and need not be indepen- dently established to have been for the official’s personal benefit. In R v ACS Public Sector Solutions Inc [2007] ABPC 315, the Alberta Provincial In parallel, a special anti-corruption enforcement unit (the Unité per- Court noted that the giving of even a single ticket to a sports event could manente anticorruption, or UPAC) of the Quebec provincial police has amount to a ‘benefit’ within the meaning of the bribery provisions of the executed a number of high-profile search warrants against construction Criminal Code, and that the fact that one of the tickets (to a hockey game) companies and public bodies, and made numerous arrests of construc- was given to the officer at the time that the company’s contract was being tion executives and public officials. As of December 2014, it is reported considered for renewal would have been sufficient to commit the company to have more than 40 investigations in progress. The UPAC has success- to trial on the basis that the ticket was given ‘in respect of’ the contract- fully engaged in joint investigations with federal agencies such as the approval process. Although the charges against the company were eventu- Competition Bureau, enabling charges to be laid under both federal and ally dismissed on the ground that section 121 does not apply to municipal provincial statutes. Allegations of corruption have also resulted in the res- government officials as in that case, the finding nevertheless highlights the ignation of the mayors of Montreal and Laval. The Quebec government has risk of hospitality and entertainment expenses incurred for the benefit of introduced legislation to address corruption in public tenders by requiring government officials. Had the charges been laid under section 123 of the bidders to prove they are not corrupt or involved in collusion. Criminal Code, which applies to municipal officials, it is not certain that the outcome would have been the same.
Milos Barutciski [email protected]
3400 One First Canadian Place 4500 Bankers Hall East, 855 2nd Street SW Toronto, Ontario M5X 1A4 Calgary, Alberta T2P 4K7 Canada Canada Tel: +1 416 777 6556 Tel: +1 403 298 3100 Fax: +1 416 863 1716 Fax: +1 403 265 7219 www.bennettjones.com
56 Getting the Deal Through – Anti-Corruption Regulation 2015 PRK Partners sro Attorneys at Law CZECH REPUBLIC
Czech Republic
Radan Kubr and Jan Varˇecha PRK Partners sro Attorneys at Law
1 International anti-corruption conventions Foreign bribery To which international anti-corruption conventions is your 3 Legal framework country a signatory? Describe the elements of the law prohibiting bribery of a The Czech Republic is a signatory to the following European and interna- foreign public official. tional anti-corruption conventions: Bribe Under section 334 of the Criminal Code a bribe is defined as any unjusti- Council of Europe fied advantage consisting in direct property enrichment or other advan- • Civil Law Convention on Corruption, Strasbourg; and tages which are accorded, or which would be accorded to a bribed person • Criminal Law Convention on Corruption. or, with the consent of this person, to a third person. ‘Unjustified’ means that there is no title to this advantage (to illustrate, no bribe is provided International if, for example, a customer gives a gratuity as an expression of his or her • OECD Convention on Combating Bribery of Foreign Public Officials satisfaction with services). in International Business Transactions; and • United Nations Convention against Corruption. Public officer Czech bribery law is based on the principle that bribery may be committed 2 Foreign and domestic bribery laws by any person in connection with matters of public interest or in connection Identify and describe your national laws and regulations with business relationships. Therefore, the bribery law affects a broader prohibiting bribery of foreign public officials (foreign bribery range of cases than merely bribery of public officials. Nevertheless, if the laws) and domestic public officials (domestic bribery laws). bribery concerns a public official (ie, it is committed by or against a public official) the sanctions under the Criminal Code are higher. Foreign bribery laws As of 1 January 2010, a new criminal code became effective in the Czech Matters of public interest Republic (Act No. 40/2009 Coll) (the Criminal Code), replacing the In cases of bribery of foreign public officials, the bribe must be provided or previous criminal code (Act No. 140/1961 Coll). According to the Criminal received in connection with activities related to matters of public interest Code, foreign public officials under any international treaty to which the exercised by the foreign public official. Czech Republic is a party are considered as domestic public officials. Conducting matters of public interest means satisfying the interests Therefore, bribery of foreign and domestic public officials is governed of citizens and legal persons in the area of material, social, cultural and by the same regulation, namely by the Criminal Code and other Czech other needs and fulfilling an obligation under the law or under a contract, criminal law regulations. the purpose of which is to ensure that there is no harm or unjustified advan- tage of participants of business relationships (or persons acting on such Domestic bribery laws participants). Domestic bribery is governed by the Criminal Code, the act on criminal The Criminal Code provides for three types of criminal offences in proceedings, as amended (Act No. 141/1961 Coll) (the Criminal connection with bribery in the area of public interest: Proceedings Code), and other criminal law regulations. The Criminal Code governs both the receipt of a bribe by domestic public officials as well Receiving a bribe as the provision of a bribe to domestic public officials. Indirect bribery is According to section 331 of the Criminal Code a bribe is considered to have also criminalised by the Criminal Code (see question 3). On 1 January 2012 been received if a person – on his or her own or through a third person – the Act on Corporate Criminal Liability (Act No. 418/2011 Coll) became solicits, receives or accepts a promise of a bribe in connection with the effective and established the criminal liability of legal entities in relation provision of matters of public interest. to certain offences, including bribery. In addition, other statutes provide for various obligations in connection with anti-corruption laws, namely Offering a bribe Act No. 89/2012 Coll, the civil code, as amended (the Civil Code), Act According to section 332 of the Criminal Code, offering of a bribe is under- No. 90/2012 Coll, on business corporations, as amended (the Business stood as providing or promising a bribe in connection with the provision of Corporations Act), Act No. 563/1991 Coll, on accounting, as amended matters of public interest. (the Accounting Act), Act No. 93/2009 Coll, on auditors, as amended (the Auditors Act), Act No. 159/2006 Coll, on conflict of interests, as amended Indirect bribery (the Conflict of Interests Act), Act No. 256/2004 Coll, on the capital According to section 333 of the Criminal Code, indirect bribery is a bribe market, as amended (the Capital Market Act) and Act No. 137/2006 Coll, offered to or received by a person who – on his or her own or through a third on public procurements, as amended (the Public Procurements Act). person – influences public officials. Corruption under Czech law includes soliciting, receiving, offering or receiving a promise of a bribe, irrespective of whether the domestic public official eventually receives the total promised amount of the bribe.
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4 Definition of a foreign public official can be received by the foreign public official directly or the foreign public How does your law define a foreign public official? official may receive it for the benefit of a third party. Such intermediary or third party is committing a criminal offence of receiving or offering a bribe Section 127 of the Criminal Code defines a public official as a: as an accessory or, as the case may be, as an accomplice. Please note that • judge; it depends on the specific circumstances of every case which are judged by • state prosecutor; the court. • President of the Czech Republic, member of parliament of the Czech If the intermediary solicits or receives the bribe for itself in order to Republic, member of the government of the Czech Republic, or other influence a foreign public official, indirect bribery is committed. In -con persons who act in a public authority body; trast to indirect bribery, the above-mentioned bribery as an accessory or • member of a municipal council, officer of municipal authorities, accomplice is committed by a person who acts in cooperation with the administration authority or other public authority; foreign public official in connection with the bribe. • member of military or police forces; • judicial executor (in a specified area of his or her activities); 8 Individual and corporate liability • notary public (in a specified area of his or her activities); Can both individuals and companies be held liable for bribery • financial arbitrator or its deputy; and of a foreign official? • any person appointed as a forest ranger, park, fish or game warden. Corporate criminal liability was established by Act No. 418/2011 Coll, on The above definition also applies to a foreign public official if an interna- criminal liability of legal persons and procedure against them, with effect tional treaty so states or if such public official exercises his or her powers in from 1 January 2012 (Corporate Criminal Liability Act). The Corporate the territory of the Czech Republic with the consent of Czech authorities. Criminal Liability Act establishes criminal liability of legal entities in rela- In addition to these persons, foreign public officials according to the tion to certain crimes, including bribery, as defined by the Criminal Code. Criminal Code are also persons that: Only public entities fall within the ambit of the law, except for states, • act in a legislative authority, judicial authority, or other public author- regional public organisations when exercising their public authority and ity of a foreign country; public international organisations. • act, are employed or work in an international judicial authority; Bribery offences committed by a company’s statutory bodies or rep- • act, are employed or work in an international or supranational organi- resentatives, leading or controlling employees, persons having substan- sation, or in its body or institution; or tial impact on the company’s decision-making processes and employees • act under the capacity of a legal person in which the Czech Republic or when carrying out professional duties are imputed to the legal entity. A a foreign country has a decisive influence. legal entity may incur liability even if it is not apparent which employee was personally responsible for the offence. Criminal liability may also be It is a criminal offence of bribery under the Criminal Code if it was commit- transferred to the legal successor of the breaching entity. ted in connection with a foreign public official’s competence and liability within a provision of matters of public interest. 9 Civil and criminal enforcement Is there civil and criminal enforcement of your country’s 5 Travel and entertainment restrictions foreign bribery laws? To what extent do your anti-bribery laws restrict providing foreign officials with gifts, travel expenses, meals or Bribery-related criminal offences are primarily enforced under criminal laws, and the Criminal Proceeding Code sets out that a criminal court may entertainment? decide on damages directly in the criminal proceedings, if certain require- There are no provisions determining, in particular, the provision of gifts, ments are satisfied. travel expenses, meals or entertainment. The definition of a bribe under Moreover, the Civil Code also recognises bribery as an unfair competi- the Criminal Code is broad. A bribe is an unjustified advantage consisting tion practice and provides for the possibility to sue for damages incurred in direct property enrichment or in other advantages. The legal definition in connection with bribery-related criminal offences in civil proceedings. is broad enough so as not to include only an offer of money. A ‘property advantage’ may be a financial advantage or any material advantage. ‘Other 10 Agency enforcement advantages’ can include, for example, any reciprocal service. What government agencies enforce the foreign bribery laws Generally, gifts, travel expenses, meals or entertainment may be con- and regulations? sidered as a bribe if the requirement of property enrichment or other advan- tage to which there is no entitlement is satisfied. The value of the bribe is Primarily, there is an obligation of the police and the state prosecutor to not decisive, and can be minimal. In that respect, please also note that one enforce laws against criminal offences of bribery through criminal proce- of the general rules of the Criminal Code is that the criminal offence com- dure. A special unit was established within the police that is responsible mitted according to the Criminal Code must be detrimental to the public. for detecting corruption and financial criminality. This unit specialises in Such detriment to the public in every single case must be determined by the investigations of bribery. There is a special government agency responsi- court. In addition, the sanctions depend on the value of the bribe. ble for the enforcement of the foreign bribery laws and regulations called the Government Anti-Corruption Committee composed of the Deputy 6 Facilitating payments Prime Minister for Coordination of the Fight against Corruption, Minister Do the laws and regulations permit facilitating or ‘grease’ of Foreign Affairs, Interior Minister, Justice Minister, Finance Minister, Defence Minister, Local Development Minister and Transport Minister. payments? The Government Anti-Corruption Committee is an advisory body in the As mentioned in question 5, the definition of a bribe under the Criminal field of combating corruption and evaluation of corruption risks within the Code is broad and without exceptions. Therefore, no facilitating or ‘grease’ legislative process. payments are allowed. There are also international as well as non-governmental organisations working in the Czech Republic that deal with anti-corruption matters, for 7 Payments through intermediaries or third parties example, Transparency International. In what circumstances do the laws prohibit payments through 11 Leniency intermediaries or third parties to foreign public officials? Is there a mechanism for companies to disclose violations in The Criminal Code distinguishes several types of bribery through interme- exchange for lesser penalties? diaries or third parties. As regards the receipt or offer of a bribe (see ques- tion 3), these criminal offences may be committed through an intermediary Under Czech law, there is no specific leniency programme or mechanism or third parties. Accordingly, the bribe may be provided, offered or prom- in connection with bribery-related crimes. ised to the foreign public official, or the foreign public official may solicit, receive or accept the promise of a bribe through an intermediary. The bribe
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12 Dispute resolution Personality principle Can enforcement matters be resolved through plea The criminal offence committed in a foreign country may also be prose- cuted under Czech criminal law if the offender is of Czech citizenship or agreements, settlement agreements, prosecutorial discretion if it is a person without citizenship but he or she has permanent residence or similar means without a trial? in the Czech Republic, or if the legal entity has its residence in the Czech The Criminal Code distinguishes between a felony, as a more serious Republic. criminal offence, and a misdemeanour, as a less serious criminal offence. Misdemeanours are criminal offences committed negligently or criminal Protection principle offences committed intentionally, which can result in a maximum penalty Some specific criminal offences are prosecuted under Czech criminal law of imprisonment for up to five years. All other criminal offences are con- even if the crime was committed abroad by a person who is not a citizen sidered felonies. of the Czech Republic or a person with permanent residence in the Czech Some types of bribery are misdemeanours. In those cases, a settle- Republic. ment agreement may be concluded under the conditions set out by the Criminal Proceeding Code (the accused transfers money (the amount is Universality principle determined by the court or state prosecutor) to the court’s account or to the A criminal offence committed in a foreign country can also be prosecuted state prosecution’s account to be used for socially beneficial purposes, etc). under Czech criminal law if the criminal offence was committed against The settlement agreement must be confirmed by the court or by the a citizen of the Czech Republic or against a person who has permanent state prosecutor (at the pretrial phase). All mandatory conditions must be residence in the Czech Republic, and if the criminal offence is punishable satisfied together with the court’s or state prosecutor’s consideration that in the territory where the criminal offence was committed or in a territory the settlement is sufficient with regard to the committed misdemeanour which is not under any criminal competence. and with regard to the defendant and its property relations. Secondary universality principle 13 Patterns in enforcement Czech criminal law is also applicable in cases where a criminal offence was Describe any recent shifts in the patterns of enforcement of the committed: foreign bribery rules. • in a foreign country by a person without Czech citizenship or by a per- son without citizenship and without permanent residence in the Czech As mentioned in question 2, the Criminal Code was adopted in the Czech Republic if: Republic with effect from 1 January 2010 and brought certain changes • the criminal offence is punishable in the territory of state where it relating to the regulation of bribery. was committed; From 1 January 2010, bribery through an intermediary or for the ben- • the offender was apprehended in the Czech Republic and he or efit of a third party is also a criminal offence. The intermediary or, as the she was not extradited to another country or to another authorised case may be, the third party is also punishable, frequently as an accomplice person; and or accessory. • a foreign country or other authorised person have requested that Corruption in the private sector was added to the new Criminal Code. the prosecution takes place in the Czech Republic; or It was adopted based on Council Framework Decision 2003/568/JHA of 22 • by a foreign citizen, by a person without citizenship and without per- July 2003, on combating corruption in the private sector. For more details, manent residence in the Czech Republic or by a legal entity without its see question 22. residence in the Czech Republic if the criminal offence was commit- The new Criminal Code also increased the maximum sentences in ted for the benefit of a company (legal person) which has its registered cases of offences connected with bribery. seat or organisational unit in the Czech Republic or for the benefit of a natural person who is an entrepreneur and has his or her organisa- 14 Prosecution of foreign companies tional unit or registered place of business in the Czech Republic. In this In what circumstances can foreign companies be prosecuted case the penalty imposed for the criminal offence must not be stricter for foreign bribery? than under the law of the country where the criminal offence was committed. Both natural and legal persons may be prosecuted for foreign bribery. As regards a legal entity, liability in the Czech Republic may be established Force under the international treaty based on its seat, the seat of its branch office, as well as the performance Criminal offences are prosecuted under Czech criminal law if so stated in of activities or ownership of property in the Czech Republic. The following an international treaty which forms part of the Czech legal system. conditions must be satisfied. 15 Sanctions Territoriality principle What are the sanctions for individuals and companies violating Criminal law applies to all criminal offences committed within the Czech the foreign bribery rules? Republic. A criminal offence is committed in the Czech Republic if it was performed on this territory, even if the infringement or endangerment Individuals of a protected interest under the Criminal Code occurred or should have Receiving a bribe is punishable by up to four years in prison or prohibition occurred totally or partially in a foreign country, or the criminal offence of the relevant activity. Soliciting a bribe is punishable by up to five years was performed in a foreign country, but the infringement or endanger- in prison. The penalty is higher if the criminal offence is committed by a ment of the protected interest under the Criminal Code happened or public official (as defined in question 4) or if the person wants to obtain should have happened totally or partially within the territory of the Czech profit of substantial value – up to 12 years in prison or forfeiture of property Republic (section 4 of the Criminal Code). This applies to accessories. The (or both). accessory may also be prosecuted in the Czech Republic if the accessory In cases of offering a bribe the maximum penalty which may be partially acts within the Czech Republic even if the criminal offence was imposed is two years imprisonment or a monetary fine. The penalty is committed within the territory of a foreign country. An accessory may be higher if bribery is committed against a public official (as defined in ques- sued in the Czech Republic irrespective of whether the criminal offence is tion 4) or if the person wants to obtain profit of substantial value. Maximum also punishable under foreign law. penalties are six years in prison, a monetary fine or forfeiture of property. For indirect bribery of a public official, the maximum penalty is three years Registration principle in prison. A criminal offence is also prosecuted under Czech criminal law if commit- Monetary fines are based on a daily rate. The court may impose a fine ted on board a ship or other vessel, aircraft or other means of air transport based on 20 to 730 of these daily rates, which can be from 100 to 50,000 if such transport is registered in the Czech Republic. The principles men- korunas for one daily rate. A forfeiture of property affects all the property tioned above under the territoriality principle are also applicable here. of the convicted person or that part of the property of the convicted person which is specified by the court. If other requirements under the Criminal Code are satisfied the court may impose other sanctions, for example, www.gettingthedealthrough.com 59 CZECH REPUBLIC PRK Partners sro Attorneys at Law house arrest, community service, forfeiture, prohibition from a specific 19 Prosecution under financial record keeping legislation place or event, loss of honorary degrees and honours, loss of military rank Are such laws used to prosecute domestic or foreign bribery? or deportation. Legislation on financial record keeping is not used to prosecute bribery in Companies the Czech Republic with the exception of auditors, as mentioned in ques- However, please note that the only sanctions that a legal entity may receive tion 18. For prosecution of bribery, only criminal laws are used. are: • dissolution of the entity; 20 Sanctions for accounting violations • forfeiture of the entity’s property; What are the sanctions for violations of the accounting rules • monetary fine (based on 20 to 730 daily rates, rating from 1,000 to associated with the payment of bribes? 2 million korunas); • confiscation of an item or a different property of value; The Criminal Code includes some criminal offences in connection with • ban from carrying out its activities; the accounting rules for entrepreneurs. These offences are not primarily • ban from executing its public procurement deals; (or naturally) considered as bribery-connected criminal offences. • ban from receiving subventions; or The Criminal Code includes a breach of obligation during the adminis- • publication of the judgment. tration of extraneous property (sections 220 and 221). This criminal offence also subsumes a breach of obligations by a statutory body of a company The type of punishment is determined by the court at its sole discretion, which is obliged to administer property of the company, however it does taking into account the impact on third parties, in particular the punished not apply in relation to a legal entity. entity’s creditors. There is also a criminal offence of distortion of data connected with the state of management and assets (section 254). If any entity that is 16 Recent decisions and investigations obliged to administer accounting books, inserts other documents used to summarise the state of management and assets, or if the entity mentions Identify and summarise recent landmark decisions or false or biased data, or if the entity changes, destroys, damages or hides investigations involving foreign bribery. these books, inserts or documents and this results in danger to the property We are not aware of any such cases. rights of a third person or timely or due tax assessment, there is a possi- ble penalty of imprisonment of up to eight years, prohibition of a relevant Financial record keeping activity or a financial penalty. This offence is applicable to legal persons. As in question 17, there are also obligations under the Public Registers 17 Laws and regulations Act, Accounting Act and Capital Market Act. What legal rules require accurate corporate books and records, The sanction for breach of obligation under the Public Registers Act effective internal company controls, periodic financial may be imposed on the company. If the company doesn’t publish its final statements or external auditing? statements and annual reports in the Commercial Register, a penalty may also be imposed of up to 100,000 korunas. The requirements for accurate corporate books and records, effective The Accounting Act sets out an obligation of entities in the field of internal company checks, periodic financial statements or external audit- accounting (see question 17). If these obligations are breached there is a ing under Czech law are included in the Business Corporations Act, the possible financial sanction of up to 6 per cent of the value of the entity’s Accounting Act and the Capital Market Act. total assets. Under the Accounting Act, accounting entities (including companies) There are also sanctions for breach of obligation under the Capital are obliged to keep their accounting books and records and they are also Market Act if the obliged entity does not satisfy its information obligation. obliged to observe other requirements under the Accounting Act. The penalty may be a fine up to 20,000,000 korunas. Under the Accounting Act, companies are obliged to have their period- Further, statutory bodies of a company are obliged under the Civil ical financial statements audited by an external auditor when legal require- Code and under the Business Corporations Act to exercise their activities ments are satisfied. Therefore audits are not obligatory for all companies. (including the manager to secure performance of the above-mentioned Companies and other entities registered in the commercial register of financial record keeping obligations by the company) with the due care the Czech Republic (the Commercial Register) are also obliged to publish of a prudent manager. If this obligation is breached they are responsible their financial statements (including consolidated statements) and annual for damage under the Civil Code and the Business Corporations Act (see reports under the provisions of Act No. 304/2013 Coll, the Public Registers question 9 concerning decisions on damages by the criminal court). Act (the Public Registers Act). These documents must be filed with the relevant court administering the Commercial Register on an annual basis. 21 Tax-deductibility of domestic or foreign bribes Other requirements are also specified in the Capital Market Act, which Do your country’s tax laws prohibit the deductibility of sets out obligations for the companies with listed securities. domestic or foreign bribes? 18 Disclosure of violations or irregularities Under section 25 of Act No. 586/1992 Coll, on income taxes, as amended To what extent must companies disclose violations of anti- (the Income Tax Act), a tax deduction of a consideration offered to a foreign bribery laws or associated accounting irregularities? public official or to a third person with that foreign public official’s consent in connection with the execution of his or her office is not allowed. It is If investigated for bribery offences, companies have an obligation to dis- not allowed even if the foreign public official is from a country where this close violations of anti-bribery laws or associated accounting irregularities kind of consideration is tolerated, is not considered a crime or is common. to the court, state prosecutors or police. Nevertheless, there is an obliga- tion under the Criminal Code requiring individuals to announce the crimi- Domestic bribery nal offence of receiving a bribe and offering a bribe if they have knowledge about it. Otherwise he or she can be punished with imprisonment of up to 22 Legal framework three years. This obligation applies to all individuals including, for exam- Describe the individual elements of the law prohibiting bribery ple, companies’ statutory bodies. of a domestic public official. Under the Auditors Act, auditors who audit companies’ accounting books are obliged to maintain secrecy of all information about which they As described in question 2, the Criminal Code governs foreign and domes- acquire knowledge in connection with the audited companies or audited tic public officials under the same regime. Therefore, the elements men- group of companies. It is not considered an infringement of secrecy by an tioned in question 3 about foreign public officials apply in the same way to auditor if the auditor provides information to the relevant authorities (police domestic public officials. or state prosecutor) which may indicate that a criminal offence linked to bribery was committed. The auditor is also obliged to inform the statutory and supervisory body of the company in writing about this knowledge.
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23 Prohibitions Does the law prohibit both the paying and receiving of a bribe? Update and trends The Criminal Code prohibits both paying and receiving a bribe. The In December 2014, the Czech government approved a new Anti-Corruption Strategy for 2015 to 2017 and the Action Plan on Criminal Code also criminalises the acceptance of a promise of a bribe, Combating Corruption for 2015. The four main goals and priorities request for a bribe, provision of a bribe and giving a promise of a bribe (see of Anti-Corruption Strategy are: question 3). As regards bribery through an intermediary or for the benefit • effective and independent executive; of a third person, see question 7. • transparency and open access to information; • economical management of Czech state’s properties; and 24 Public officials • development of civil society.
How does your law define a public official and does that The main instrument in the fight against corruption shall be annual definition include employees of state-owned or state- action plans. The 2015 action plan should be approved by the Czech controlled companies? government by June 2015. The definition of a public official is included in Section 127 of the Criminal Code. For more details please see our answer to question 4 above. It is a criminal offence of bribery under the Criminal Code if the act 26 Travel and entertainment was committed in connection with this public official’s competence and Describe any restrictions on providing domestic officials liability (in connection with the conduct of matters of public interest). The with gifts, travel expenses, meals or entertainment. Do the bribery of these public officials are penalised with stricter sanctions. restrictions apply to both the providing and receiving of such As regards the definition of public officials under the Criminal Code benefits? (see above), it does not specifically include employees of state-owned or state-controlled companies. See question 5. The restrictions apply to both the provision and receipt of Nevertheless, where bribery is concerned it is important to note that benefits. it covers cases when a person gives or receives a bribe in connection with conducting matters of public interest (for the definition of public officials 27 Gifts and gratuities and conducting matters of public interest, see question 3). If a bribe is Are certain types of gifts and gratuities permissible under your offered or requested by an employee of a state-owned or state-controlled domestic bribery laws and, if so, what types? company, and if it has a connection with the conduct of matters of public interest, the bribery legislation would also apply to these employees. Bribery law does not include any exemptions. There are no permissible gifts or gratuities. See question 5. 25 Public official participation in commercial activities Can a public official participate in commercial activities while 28 Private commercial bribery serving as a public official? Does your country also prohibit private commercial bribery? The Conflict of Interests Act sets out certain obligations for certain domes- The Criminal Code includes private commercial bribery (sections 331 and tic public officials (as defined in the Conflict of Interests Act). In general, 332). The Criminal Code governs bribery in the private sector in connection such domestic public officials are prohibited from: with business. The Criminal Code criminalised both receiving and offering • carrying out a business or operating other profit-making activities; a bribe in the private commercial sector. Conditions for private commer- • being, or being a member of, a statutory, directional, supervisory or cial bribery are the same as the conditions for public officials as regards controlling body of an undertaking; or qualified facts of the case, etc. • being an employee or being in a service relationship unless the rela- tionship is part of his or her duties as a public official. 29 Penalties and enforcement What are the sanctions for individuals and companies violating A ban to participate in commercial activities also applies to certain other the domestic bribery rules? categories of public officials (such as judges or members of military or police forces), under special acts regulating such professions (eg, Act No. The type of a sanction imposed on a legal entity for bribery is to be deter- 6/2002 Coll, on Courts and Judges, as amended or Act No. 361/2003 Coll, mined by the court upon its full discretion from a list of sanctions possible on Service of Members of Armed Forces, as amended, etc). (see question 15). Regarding sanctions of individuals, see also question 15. Please note that sanctions for commercial bribery (unless the person wants to obtain profit of substantial value) are lower than the sanctions for brib- ery relating to public officials.
Radan Kubr [email protected] Jan Vařecha [email protected]
Jáchymova 2 Tel: +420 221 430 111 110 00 Prague 1 Fax: +420 224 235 450 Czech Republic www.prkpartners.com
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30 Facilitating payments been made by Marek Dalík, an informal adviser to Miroslav Topolánek, the Have the domestic bribery laws been enforced with respect to former Czech Prime Minister, in connection with a purchase of PANDUR armoured personnel carriers by the Czech army in 2008. facilitating or ‘grease’ payments? Another recent corruption case involves David Rath, former governor See question 6. of Středočeský Region and a prominent member of the Czech socialist party (then the strongest opposition party) who was arrested and accused 31 Recent decisions and investigations of taking bribes, causing damage to the interests of the European Union, manipulating with public tenders and other criminal conduct. The case is Identify and summarise recent landmark decisions and now with the court of first instance, which has not yet issued its ruling. Mr investigations involving domestic bribery laws, including any Rath faces punishment of up to 12 years’ imprisonment. investigations or decisions involving foreign companies. In June 2013 a major corruption scandal, the Nečas case, concerning In 2011, Minister of Trade and Business Martin Kocourek was also forced bribery and money laundering broke out. Several individuals including to resign when the media found out that his mother had gained 16 million Jana Nečasová (Nagyová), former head of the Prime Minister’s office and korunas in 2010 from doing business with bonds. He later admitted that now his wife, were involved in alleged bribery and money laundering. Jana the money was his and resigned. The case is now being investigated as Nečasová (Nagyová) was accused of accepting bribes (luxury gifts and potential harm done to a creditor, but no criminal prosecution for corrup- other unlawful advantages) to influenceg Nečas’s performance of his pub- tion has been started. lic function as the Prime Minister, as well as of abusing the powers of a In 2012, Mr Alexandr Novák, the former mayor of the city of Chomutov, public official. The case resulted in the resignation of Petr Nečas as Prime was sentenced to four years in prison and a fine of 5 million korunas for Minister and chairman of the Civic Democratic Party (ODS). The ongoing receiving a bribe of 43 million korunas. court trial of Jana Nečasová was recently adjourned to mid-March 2015. A major corruption case initiated in autumn 2012 relates to an alleged As a result of the investigation of the case, Petr Nečas was also accused of request for a bride of approximately 500 million korunas which should have bribery early in 2014.
62 Getting the Deal Through – Anti-Corruption Regulation 2015 Plesner Law Firm and Moalem Weitemeyer Bendtsen Law Firm DENMARK
Denmark
Claus Ryberg Hoffmann and Christian Bredtoft Guldmann Plesner Law Firm and Moalem Weitemeyer Bendtsen Law Firm
1 International anti-corruption conventions According to section 306 of the Danish Criminal Code, sections 122, To which international anti-corruption conventions is your 144 and 299 also apply to legal persons. Consequently, both individuals and legal persons may incur criminal liability under said provisions. See country a signatory? also question 8. Denmark has ratified several international anti-corruption conven- Concerning jurisdiction, see question 14. tions, the most notable being the United Nations Convention against Corruption (UNCAC) (ratified in 2006), the Council of Europe Criminal Foreign bribery Law Convention on Corruption (ratified in 2002), and the Organisation 3 Legal framework for Economic Co-operation and Development (OECD) Anti-Bribery Convention according to which Denmark has implemented changes into Describe the elements of the law prohibiting bribery of a Danish legislation, regarding, inter alia, accounting rules that ensure trans- foreign public official. parency in annual reports. Furthermore, in 1998 Denmark implemented a See question 2. tax deduction rule that explicitly states that expenses used in connection with bribery of public officials (as defined by the Danish Criminal Code) 4 Definition of a foreign public official are not deductible. This implementation was carried out in accordance with the OECD recommendations of 1996. How does your law define a foreign public official? Being a part of the European Union, Denmark has also implemented As mentioned under question 2, the wording ‘exercising a Danish, foreign the relevant directives and protocols issued by the European Union against or international public office or function’ in sections 122 and 144 is inter- corruption, eg, the Directive on Procurement implementing restrictions on preted broadly in accordance with the guidelines from the OECD and the participation in public procurement tenders and the convention on the pro- Council of Europe. In this respect the term ‘foreign public official’ includes tection of the European Communities’ Financial Interests from 1995 with any individual employed, elected to or acting on behalf of a foreign subsequent protocols. Denmark has also committed itself to the Council’s government or international public organisations (eg, the OECD, NATO, Joint Action of 22 December 1998 on corruption in the private sector. UN and the EU). Generally and in accordance with the guidelines from OECD, the 2 Foreign and domestic bribery laws term public office or function will include, inter alia, functions which are Identify and describe your national laws and regulations carried out through commercial companies on behalf of a public office (ie, prohibiting bribery of foreign public officials (foreign bribery public enterprises). In that regard ‘public enterprises’ are defined as any laws) and domestic public officials (domestic bribery laws). enterprise, regardless of its legal form, over which a government, or gov- ernments, may, directly or indirectly, exercise a dominant influence. The The rules prohibiting bribery of foreign public officials and domestic dominant influence in said enterprise may be exercised by either major- public officials appears from the Danish Criminal Code. Generally, the ity of share capital, majority of votes or the ability to appoint a majority Danish Criminal Code distinguishes between ‘public active bribery’ (sec- of the members of the enterprise’s administrative or managerial body or tion 122), ‘public passive bribery’ (section 144) and ‘private bribery’ (active supervisory board. and passive – section 299). The relevant elements of the different provi- Finally we note, that the general rules on jurisdiction under the Danish sions are described below under question 3. Section 122 of the Danish Criminal Code contains certain limitations to the prosecution of viola- Criminal Code prohibits the unduly granting, promising or offering of tions the Criminal Code only grants jurisdiction to acts committed outside a gift or another privilege to a person exercising a Danish, foreign or Denmark if the act is carried out by a Danish natural or legal person, if the international public office or function in order to induce him or her to act is carried out in Denmark or the action is deemed a ‘serious crime’ or a do or fail to do anything related to his or her official duties. The wording crime against the security and interests of the Danish state. Consequently, ‘exercising a Danish, foreign or international public office or function’ the jurisdiction rules do not contain the same extensive extra-territorial is subject to a broad interpretation in accordance with the guidelines jurisdiction as the Foreign Corrupt Practices Act or the UK Border Agency. from the OECD and the Council of Europe. As such, the phrase covers any individual employed, elected to or acting on behalf of the Danish 5 Travel and entertainment restrictions judicial system, the Danish state and any Danish municipalities as well as any persons employed, elected to or acting on behalf of a foreign To what extent do your anti-bribery laws restrict providing government or international public organisations (such as the OECD, foreign officials with gifts, travel expenses, meals or NATO, UN and the EU). entertainment? Further, section 144 of the Danish Criminal Code prohibits any person Section 144 of the Danish Criminal Code prohibits any person or individual exercising a Danish, foreign or international public office or function from from unduly receiving, demanding or accepting the promise of a gift or unduly receiving, demanding or accepting the promise of a gift or other other privilege while exercising a Danish, foreign or international pub- privilege. lic office or function. The section covers even minor unduly gifts, travel Finally, section 299 of the Danish Criminal Code regulates bribery in expenses, meals or entertainment. In practice, however, it has been rec- the public sector, including in the form of kickbacks, whereby a person in ognised that certain gifts and expenses are excluded. his or her capacity as trustee receives, demands or accepts the promise of, Some guidance regarding the scope of section 144 is found in the 2007 for the benefit of himself or herself or of others, a pecuniary advantage, as and 2010 guide to public employees, which was published by the Danish well as any person who grants, promises or offers such advantage. Agency for the Modernisation of Public Administration. The guide sets www.gettingthedealthrough.com 63 DENMARK Plesner Law Firm and Moalem Weitemeyer Bendtsen Law Firm forth, among other things that certain anniversary gifts are considered 10 Agency enforcement reasonable and proportionate. The guide does not include any specific What government agencies enforce the foreign bribery laws guidance on hospitality lunches provided in connection with meetings. and regulations? However, according to the guide, a reasonable and proportional lunch that has a direct connection to a justifiable meeting will, in general, be consid- The Danish State Prosecutor for Serious Economic and International ered compliant and thus outside the scope of section 144 of the Danish Crime (SØIK) deals with cases concerning economic and international Criminal Code. This would generally be the case, in so far that the hospital- crime, including allegations of bribery and corruption that are substan- ity lunch is of a modest nature and the meeting in question is work-related tial in scale, are part of organised crime, which is carried out by applying and can be considered a customary part of doing business. unique business practices, that otherwise qualifies for special attention or Consequently, and as a starting point, both the granting of unreason- is of comprehensive nature. SØIK is nationwide and a part of the Danish able and/or disproportionate gifts, travel expenses, meals or entertain- Prosecution Service. The Prosecution Service is governed by the Minister ment, etc, to foreign officials as well as the opposing receiving, demanding of Justice who supervises all public prosecutors. The investigations con- or accepting of such gifts and privileges are prohibited by sections 122 and ducted by SØIK are subject to the Danish Administration of Justice Act, 144 of the Danish Criminal Act. which, inter alia, provides the setting of the rights and limitations of the public authorities in general. 6 Facilitating payments Should any act of bribery covered by the relevant sections of the Do the laws and regulations permit facilitating or ‘grease’ Danish Criminal Code fall outside the field of work of SØIK, the section in question is to be enforced by the local police prosecutors. payments? Under Danish Law, facilitation payments are generally considered bribes 11 Leniency falling within the scope of sections 122 and 144 of the Danish Criminal Is there a mechanism for companies to disclose violations in Code. However, pursuant to the legislative comments on the 2000 Act that exchange for lesser penalties? incorporated the current wording of section 122, special circumstances in other countries may cause facilitation payments to be outside of the Self-reporting of bribery may have an influence on a sentence imposed on scope of provision. More specifically, gifts or other privileges provided to a person or a company if criminal proceedings lead to a person or a com- a public official to induce him or her to do or fail to do anything related to pany being convicted under the Danish Criminal Code. his or her official duties may fall outside the scope of the provision if the Furthermore, when determining a sentence regarding a violation of facilitating payment is kept to a minimum and is made in a country where the Danish Criminal Code, it must normally be considered a mitigating such facilitating payments are customary. Whether facilitating payments circumstance that the offender either voluntarily reported himself to the provided under such circumstances fall outside the scope of section 122 authorities and made a full confession, or provided information crucial to of the Danish Criminal Code must be assessed on a case-by-case basis solving criminal acts committed by others, see sections 82(9) and 82(10) of depending on the circumstances, including the purpose of the facilitation the Danish Criminal Code. However, the Danish bribery provisions in the payment which has been provided. Danish Criminal Code do not contain the same well-established leniency principles as, for example, the UK Bribery Act or Danish competition law 7 Payments through intermediaries or third parties infringements, which provide for immunity or significant reductions. In what circumstances do the laws prohibit payments through 12 Dispute resolution intermediaries or third parties to foreign public officials? Can enforcement matters be resolved through plea Direct payments and indirect payments through intermediaries or third agreements, settlement agreements, prosecutorial discretion parties to foreign public officials are treated equally under sections 122 or similar means without a trial? and 299 of the Danish Criminal Code. Consequently, any payments made through intermediaries or third parties which knowingly are conducted as Enforcement matters may be resolved through settlement agreements bribes are also prohibited under Danish Law. entered into with the Prosecution Service. An example hereof is a case involving a Danish company alleged to be involved in bribery in Africa 8 Individual and corporate liability which was resolved through a settlement agreement entered into between Can both individuals and companies be held liable for bribery the company and the SØIK. The agreement imposed a combined criminal of a foreign official? fine and confiscation of 2.5 million kroner and 20 million kroner respec- tively. It should be noted that such settlement agreements are not subject Both natural and legal persons (corporations, funds, partnerships, pub- to court approval in Denmark. licly owned companies, etc) can be held liable for violations of sections 122 and 299 of the Danish Criminal Code, see section 306 of the Danish 13 Patterns in enforcement Criminal Code. In this respect, it follows from a general corporate liabil- Describe any recent shifts in the patterns of enforcement of the ity perspective of Danish law, that a legal person cannot act independently foreign bribery rules. and consequently any violation by a legal person therefore requires an act or omission by one or more natural persons acting on behalf of the legal The Danish State Prosecution for Serious Economical and International person. It is not a requirement that the individual acting is part of the Crime has over the years only brought very few bribery cases before the management. Furthermore, the legal person can only be held liable if the Danish courts and has faced harsh criticism for the lack of engagement natural person(s) offering bribes was not acting abnormally, taking into in bribery cases. Following the October 2014 report from Transparency consideration the businesses, practices and procedures of the specific International on enforcement levels, which grouped the Danish authori- legal person. The abnormality of the actions conducted by the natural ties’ enforcement efforts with the enforcement efforts from countries like person must be assessed on a case-by-case-basis, taking into consideration Russia, Mexico and Colombia, the SØIK has, however, publicly announced the specific circumstances of the action in question. that a team dedicated to strengthen bribery enforcement has been appointed and that investigation and enforcement of bribery cases in the 9 Civil and criminal enforcement future will be carried through. Is there civil and criminal enforcement of your country’s foreign bribery laws? 14 Prosecution of foreign companies In what circumstances can foreign companies be prosecuted Under question 15, the possible sanctions (and maximum penalties) for for foreign bribery? violations of sections 122, 144 and 299 of the Danish Criminal Code are listed. Furthermore, both individuals and legal persons may be subject to Danish and foreign individuals or companies are treated equally under civil actions and claims for damages put forward by a claimant with refer- sections 122 and 299 of the Danish Criminal Code in terms of acts of ence to violations of the mentioned sections of the Criminal Code. bribery carried out in Denmark. Consequently, both Danish and foreign
64 Getting the Deal Through – Anti-Corruption Regulation 2015 Plesner Law Firm and Moalem Weitemeyer Bendtsen Law Firm DENMARK individuals or companies that carries out actions of bribery in Denmark 18 Disclosure of violations or irregularities can be prosecuted in Denmark. To what extent must companies disclose violations of However, in terms of acts of bribery covered by sections 122, 144 anti-bribery laws or associated accounting irregularities? and 299 of the Danish Criminal Code that have been carried out outside Denmark there is a distinction between Danish and foreign natural or legal No Danish legislation requires Danish companies to report on instances of persons, as the Danish Prosecution Service only has jurisdiction towards bribery and corruption as such. This is consistent with the generally appli- foreign individuals or companies if the action in question is deemed to cable principle in Denmark that any person or entity cannot be required have effect in Denmark. Consequently, foreign individuals or companies to self-incriminate. can only be prosecuted for foreign bribery if the action is covered by sec- The consequences of an instance of bribery or corruption may indi- tion 8 of the Danish Criminal Code, which grants the Danish prosecution rectly be subject to reporting under Danish GAAP or IFRS as the case may service jurisdiction in cases of serious crimes, crimes against the security be. If material changes to a company’s activities and financial situation and interests. have occurred the management is, pursuant to the Annual Report Act, To the contrary, the Danish prosecution has jurisdiction over all required to explain these changes in a management report, which is an Danish natural persons or legal persons if the action in question is also integrated part of the annual report. Hence, if an instance of bribery has prohibited in the country in which it has been carried out. a material impact on the company’s activities or financial situation, there will be an obligation to report this in the annual report. 15 Sanctions For listed companies Danish capital markets legislation requires that What are the sanctions for individuals and companies violating the company disclose an occurrence of an anti-bribery law violation if the occurrence may have an impact on the price on the listed company’s the foreign bribery rules? shares. Such disclosure obligation may include the fact that a bribery inci- Violations of sections 122, 144 and 299 of the Criminal Code can be sanc- dent has occurred. tioned with criminal fines, imprisonment (only individuals) and forfeiture. Furthermore, violations may be sanctioned with exclusion from public 19 Prosecution under financial record keeping legislation procurement contracts. In this regard, Denmark has implemented the Are such laws used to prosecute domestic or foreign bribery? Directive on Procurement implementing restrictions on participation in public procurement tenders. With respect to imprisonment, the maximum No publicly available Danish case law exists where financial record keeping penalty is six years for violations of section 122 (active bribery) and section legislation has been used to prosecute bribery offences. Under Danish law, 144 (passive bribery), whereas the maximum penalty for violations of sec- if one offence is included in another offence the court will only penalise for tion 299 is four years. the one offence which includes the other offence. From a theoretical perspective, the prosecutor could base a bribery case 16 Recent decisions and investigations on financial record keeping legislation, however, the maximum penalty will be significantly less for financial record keeping legislation offences Identify and summarise recent landmark decisions or compared with the maximum penalty for the bribery offence. investigations involving foreign bribery. The Danish rules on bribery are part of the Danish Criminal Code, Legal proceedings involving bribery are very rare in Denmark. The most and a sentence for a bribery offence requires that the prosecutor can prove recent case related to foreign bribery dates back to 2012. criminal intent. The financial record keeping legislation is not part of the A landmark decisions in Denmark included a ruling from August Danish Criminal Code and a sentence based on financial record-keeping 2012 from the Danish Supreme Court deciding on forfeiture of 10 million legislation can also be rendered in cases of negligence. krone from the Danish company Bukkehave, which between 2000 and 2002 supplied trucks to the government in Iraq under the UN Food for Oil 20 Sanctions for accounting violations programme. The company had paid an ‘after-service fee’ in violation of the What are the sanctions for violations of the accounting rules UN embargo rules. Charges for violations of section 122 of the Criminal associated with the payment of bribes? Code were not raised as the ‘service fee’ was not paid to a specific individ- ual but to the Iraqi government and other relevant charges were dropped The penalty applicable to companies and employees for negligent and as the statute of limitations of five years barred such charges. A key issue in fraudulent accounting under the Bookkeeping Act and the Annual Report the case related to the calculation of the proceeds to be confiscated and the Act is a fine with no statutory limit. The same penalty applies in case of neg- case was appealed to the Danish Supreme Court. The Supreme Court ruled ligent or fraudulent non-compliance with the provisions in the Companies that only the profit and interest after deduction of expenses to the local Act. Such fines will normally be in the range of 10,000 krone to 20,000 agent were to be forfeited even though at least some of these expenses krone and in severe cases 50,000 krone, though no statutory limit applies. were incurred in order facilitate the bribes. If the wrongful book keeping was made with fraudulent intent the offence will be covered by the provisions on fraud in the Criminal Code Financial record keeping and the maximum sentence will in this situation be 18 months’ imprison- ment. The maximum sentence is in severe cases raised to eight years’ 17 Laws and regulations imprisonment. What legal rules require accurate corporate books and records, effective internal company controls, periodic financial 21 Tax-deductibility of domestic or foreign bribes statements or external auditing? Do your country’s tax laws prohibit the deductibility of Companies incorporated in Denmark and foreign corporations conducting domestic or foreign bribes? business in Denmark must comply with the requirements for bookkeeping Until 2000 bribe payments made by Danish companies abroad were in and record keeping set forth in the Danish Bookkeeping Act. In general, general tax-deductible. In 2000 bribes paid to foreign public officials corporations must keep their financial records and related documentation were made non tax-deductible. Similarly for private bribes made abroad, safely stored for a period of up to five years following the financial year to provided that the receiver of the bribe were in non-compliance with local which the records and documentation relate. Furthermore, in general the foreign law. Private bribes paid abroad to persons who did not breach documentation must be stored in Denmark. The obligation to comply with local foreign law by receiving the bribe were tax-deductible until 1 January the Danish Bookkeeping Act is placed with the management and the board 2014. Since 1 January 2014 Danish companies cannot deduct any bribe of directors of the company. The criminal sanctions imposed for failures payments for tax purposes. This applies both to domestic and foreign to comply range from fines for simple mistakes to imprisonment for wilful bribes, as well as to private bribes and bribery payments to public officials, and serious violations, such as trying to hide criminal activities, including even if such payments are not deemed an illegal bribe abroad. bribery. As mentioned in question 6, facilitating payments may in some situa- tions be acceptable abroad under Danish law. Based on the recent changes to the tax legislation, some payments made abroad may be acceptable from a criminal law perspective but may not be tax-deductible. www.gettingthedealthrough.com 65 DENMARK Plesner Law Firm and Moalem Weitemeyer Bendtsen Law Firm
It should be noted that even though corporate hospitality in the pri- in a diligent way and provided that it does not adversely affect the esteem vate sector, which is not unduly provided, in general is deemed outside the and trust associated with the public function. scope of the Danish anti-bribery provisions, companies are only allowed Judges can only have other ongoing engagements besides their pub- to deduct 25 per cent of such corporate hospitality costs. Restrictions also lic office in case of statutory requirements for judges taking on the specific apply to VAT refunds related to such costs. engagements or if approved by a special committee. Further, judges may act as arbitrators. Domestic bribery Certain high-ranking senior officials cannot accept positions as board members without prior approval from the relevant minister and 22 Legal framework are required to notify the minister in advance before taking on other Describe the individual elements of the law prohibiting bribery engagements. of a domestic public official. In general, public officials cannot carry out their function in specific situations if a conflict of interest occurs and must notify their superior on The legal framework prohibiting bribery of a Danish public official is set any potential conflict of interest. forth in the Danish Criminal Code sections 122 and 144. Section 122 in the Danish Criminal Code prohibits any individual and 26 Travel and entertainment legal persons from unduly granting, promising or offering a person exercis- ing a public office or function a gift or other privilege in order to induce him Describe any restrictions on providing domestic officials or her to do or fail to do anything related to his or her official duties (active with gifts, travel expenses, meals or entertainment. Do the bribery). restrictions apply to both the providing and receiving of such People employed in publicly owned companies are public officials benefits? in the terminology of section 122 to the extent that they carry out public functions. Danish public officials are prohibited from receiving gifts, travel expenses, Section 122 is not limited to situations where the bribe is paid to induce meals or entertainment if this constitutes bribery, see question 22. the public official to act contrary to his or her official duties. The only In addition, in 2007 and 2010 the Agency for the Modernisation of requirement is that the briber unduly grants, promises or offers the pub- Public Administration issued an internal memo describing when pub- lic official a gift or other privilege. ‘Unduly’ is a dynamic term. For public lic officials are allowed to receive such goods. The memo in general calls officials in a position to make any decisions, even very small gifts may be for public officials to reject receiving any gifts, travel expenses, meals or deemed ‘unduly’. entertainment if this is provided in connection with the public function. Section 144 in the Danish Criminal Code prohibits any natural per- However, proportionate gifts in connection with an anniversary, birthday son from unduly receiving, demanding or accepting the promise of a gift or similar can be accepted. Also, small gifts in connection with Christmas or other privilege, while exercising a public office or function (passive or similar can be accepted from entities or persons which the public official bribery). is cooperating with. Finally, customary gifts in connection with visits to or ‘Public official’ in the terminology of section 144 mirrors the defini- from foreign countries or foreign public entities can be accepted. tion of public official in section 122. Both provisions follow the definition of The memo from the Agency for the Modernisation of Public public officials in the OECD Anti-Bribery Convention. Administration provides examples of gifts that should be returned: Receiving a gift or other privilege may be within the scope of section • an IT supplier sends tickets for a concert to a public official following a 144 even if the gift or other privilege is not provided in order to induce the contract negotiation; public official to do or fail to do anything related to his or her official duties. • an amusement park provides free admission to the park for public Also, the public official’s receiving of subsequent acknowledgements may officials; be within the scope of section 144. • a private supplier of corporate events offers free admission to an event for a public official; and 23 Prohibitions • a telecom provider, which delivers home internet access for public officials, offers discounts to public officials on additional services. Does the law prohibit both the paying and receiving of a bribe? The Criminal Code section 122 prohibits paying a bribe, and section 144 The memo also provides examples of gifts that can be accepted: prohibits receiving a bribe. Paying a bribe is often referred to as active • an annual dinner offered by an industry organisation, provided that it bribery and receiving of a bribe is referred to as passive bribery. Prior to 1 is relevant for the relationship and future corporation and has a limited July 2013 the maximum penalty for passive bribery was six years imprison- value; and ment, whereas the maximum sentence for active bribery was three years’ • three bottles of wine following a speech given by a public official. imprisonment. As of 1 July 2013 the maximum sentence for active bribery was aligned with the maximum sentence for passive bribery, and both are The provisions in the Danish Criminal Code sections 122 and 144 apply to now six years’ imprisonment. both the providing and receiving of benefits. However, the restrictions set forth in the memo referred to above apply only to receiving such benefits 24 Public officials and the consequence of breaching these and not section 144 will be limited to the consequences for the public official as employee. However, over time How does your law define a public official and does that the memo may have an impact on the dynamic term ‘unduly’ is sections definition include employees of state-owned or state- 122 and 144 and the Danish Criminal Code. controlled companies? 27 Gifts and gratuities See question 4. The definition of public officials is the same for foreign and domestic public officials and in general the definition follows the definition Are certain types of gifts and gratuities permissible under your of public officials in the OECD Anti-Bribery Convention. domestic bribery laws and, if so, what types? Employees of state-owned or state-controlled companies are included There are no specific guidelines or permitted items contained in Danish in the definition of public officials to the extent they exercise a public legislation and no de minimis provisions apply. A recent case established function. bribery in a situation where a businessman had offered a tax official three bottles of wine, a cheap Chinese vase and offered to buy the tax official’s 25 Public official participation in commercial activities car at market value. Hence the bar for such gifts or gratuities is set very low. Can a public official participate in commercial activities while serving as a public official? 28 Private commercial bribery No general prohibition on public officials participating in commercial Does your country also prohibit private commercial bribery? activities exists in Denmark. However, for certain groups of public officials, Section 299 of the Criminal Code prohibits private commercial bribery. certain restrictions apply. Private commercial bribery in the Danish context is often referred to as A public official having status as a civil servant can only engage in return commission or kickbacks. The provision includes situations where other activities provided that his or her official tasks can still be conducted
66 Getting the Deal Through – Anti-Corruption Regulation 2015 Plesner Law Firm and Moalem Weitemeyer Bendtsen Law Firm DENMARK a person having the power to act on behalf of another person, typically on behalf of an employer, unduly accepts, demands or accepts the promise of Update and trends a pecuniary advantage. Section 299 also prohibits giving and offering such pecuniary Most large Danish businesses have implemented or are in the process of implementing anti-bribery policies and procedures and advantage. this tendency is expected to expand to mid-cap companies in the The provision is not limited to situations where the employer can coming period. prove or has suffered any loss. Further, it is not a condition that the pecuni- Danish prosecutors have so far only to a very limited extent ary advantage is given to an employee and a pecuniary advantage can be enforced bribery violations committed abroad by Danish companies, deemed a bribe even if the pecuniary advantage is not concealed from the however, recently the Danish State Prosecutor for Serious Economic employer. and International Crime has taken organisational initiatives to The provision includes both domestic and foreign bribes. strengthen enforcement in this area and has publicly announced its commitment to investigating and prosecuting bribery violations. 29 Penalties and enforcement What are the sanctions for individuals and companies violating 30 Facilitating payments the domestic bribery rules? Have the domestic bribery laws been enforced with respect to The maximum sentence for public officials receiving and for natural per- facilitating or ‘grease’ payments? sons giving a bribe to public officials is six years’ imprisonment or alterna- tively a fine with no statutory limit. Facilitating payments are as a main rule prohibited under Danish law, The maximum sentence for giving and receiving private commercial provided that such payments are unduly provided in the country in which bribery is four years’ imprisonment or alternatively a fine with no statutory it is paid. Danish authorities have so far not prosecuted Danish companies limit. for providing facilitating payments. For companies the maximum sentence for both public official and pri- vate commercial bribery is a fine with no statutory limit. 31 Recent decisions and investigations The Public Prosecutor has rendered a memo to Danish prosecutors Identify and summarise recent landmark decisions and describing when to prosecute individuals, when to prosecute companies investigations involving domestic bribery laws, including any and when to prosecute both. As a main rule, if non-senior employees have engaged in bribe in the interest of the company, the public prosecutor will investigations or decisions involving foreign companies. not file charges against such non-senior employees, but will concentrate Employees of the Danish publishing company Aller have allegedly system- its efforts on prosecuting the company. If a senior employee has engaged atically been bribing individuals who had access to information on celebri- in bribery, whether directly or indirectly, the prosecutor will file charges ties including the royal family, politicians, etc. A criminal investigation is against both the company and the senior employee. ongoing and Aller has simultaneously initiated its own investigation. Even though the maximum sentence for active and passive bribery is Currently, the Supreme Court is being asked to decide whether the six years’ imprisonment, Danish case law shows that penalties are signifi- prosecutor can require that information from Aller’s own investigation is cantly less. In 2013 a private individual was sentenced a 15,000 krone fine handed over to the prosecutor. for bribing a tax official. As for case law, see question 16.
Claus Ryberg Hoffmann Christian Bredtoft Guldmann [email protected] [email protected]
Amerika Plads 37 Amaliegade 3-5 2100 Copenhagen Ø 1256 Copenhagen K Denmark Denmark Tel: +45 30 93 71 87 Tel: +45 30 37 96 69 Fax: +45 33 12 00 14 Fax: +45 70 70 15 06 www.plesner.dk www.mwblaw.dk
www.gettingthedealthrough.com 67 ECUADOR Paz Horowitz Robalino Garcés
Ecuador
Bruce Horowitz and Ernesto Velasco Paz Horowitz Robalino Garcés
1 International anti-corruption conventions 4 Definition of a foreign public official To which international anti-corruption conventions is your How does your law define a foreign public official? country a signatory? Foreign public official is defined in UNCAC, which is, therefore, the legal Ecuador is a signatory (without reservations) to the Inter-American definition in Ecuador. There is no other definition in the legislation of Convention against Corruption (OAS) of 29 March 1996, ratified by the Ecuador. Ecuadorian Congress on 26 May 1997. From 27 February 2003 to 20 October 2008, the Commission of Civic Control of Corruption served as the central 5 Travel and entertainment restrictions authority, and was responsible for receiving and drafting requests for coop- To what extent do your anti-bribery laws restrict providing eration and assistance under the OAS. Under Ecuador’s new Constitution, foreign officials with gifts, travel expenses, meals or which became effective on 20 October 2008, a new branch of govern- entertainment? ment, the Citizens’ Participation and Social Control Council (CPCCS), is now in charge of national anti-corruption efforts. On 15 September 2005, Given the response to question 3, there is no such explicit restriction with the Ecuadorian Congress (without reservations) made it the 30th country regard to foreign officials in a foreign country. to ratify the United Nations Convention against Corruption (UNCAC), thereby permitting the convention to enter into force. Finally, Ecuador is 6 Facilitating payments a participant in the Andean Plan of Action Against Corruption (Andean Do the laws and regulations permit facilitating or ‘grease’ Community Decision 668). payments? 2 Foreign and domestic bribery laws No. Identify and describe your national laws and regulations prohibiting bribery of foreign public officials (foreign bribery 7 Payments through intermediaries or third parties laws) and domestic public officials (domestic bribery laws). In what circumstances do the laws prohibit payments through intermediaries or third parties to foreign public officials? There are no laws or regulations that specifically prohibit the bribery of foreign public officials. No such specific prohibition exists with regard to payments to foreign With regard to the laws and regulations prohibiting the bribery of public officials. However, if such payments were made in Ecuador then the domestic public officials, and beginning at the top, the present Constitution intermediaries or third parties making such payments would be subject to of Ecuador guarantees a ‘public administration free of corruption’. The Ecuadorian anti-corruption laws. In Ecuador any transfer of funds greater Constitution eliminates the statute of limitations on legal actions and pun- than US$10,000 must be reported, pursuant to the Law for the Control of ishments for the giving or receiving of bribes by government functionaries, Money-Laundering. Payments made from Ecuador to persons or accounts extortion, misuse of public funds and illicit enrichment. outside of Ecuador are subject to the payment of a 5 per cent tax, and Article 73 of the Comptroller (Inspector General) Organic Law restates (depending on the circumstances) could be subject to withholding. The the constitutional provision on statutes of limitations. failure to pay such taxes may incur criminal sanctions. Acceptance by a public functionary of a bribe, or of the promise or offer of a bribe, is penalised under the Organic Integral Criminal Code of 8 Individual and corporate liability Ecuador, article 28. Extortion by a public functionary is penalised under Can both individuals and companies be held liable for bribery the Criminal Code of Ecuador, article 281. The making, offer or promise of a foreign official? of a bribe, also known as ‘traffic influences’, is penalised under articles 285 and 286. Given the response to question 3, there is no such explicit liability with The Organic Law on Public Servants (2010) establishes administra- regard to a foreign official in a foreign country. However, if such payments tive sanctions against public functionaries who accept bribes (articles 10, were made in Ecuador then the intermediaries or third parties making such 27 and 50). payments would be subject to Ecuadorian anti-corruption laws. In Ecuador any transfer of funds greater than US$10,000 must be reported, pursuant Foreign bribery to the Law for the Control of Money-Laundering. Payments made from Ecuador to persons or accounts outside of Ecuador are subject to the pay- 3 Legal framework ment of a 5 per cent tax, and (depending on the circumstances) could be Describe the elements of the law prohibiting bribery of a subject to withholding. The failure to pay such taxes may be criminally foreign public official. sanctioned. Not applicable. Although the OAS and UN conventions establish the 9 Civil and criminal enforcement obligation to criminalise the bribery of foreign government functionaries, there is still no such legislation in Ecuador. The Attorney General’s Office is Is there civil and criminal enforcement of your country’s responsible for applying the general norms for bribery that are found in the foreign bribery laws? Criminal Code, but these norms may not be specific enough to sanction the There are no specific laws regarding foreign bribery. bribery of a foreign government functionary in a foreign country.
68 Getting the Deal Through – Anti-Corruption Regulation 2015 Paz Horowitz Robalino Garcés ECUADOR
10 Agency enforcement Reporting Standards are in effect for all corporate entities subject to the What government agencies enforce the foreign bribery laws Superintendency of Companies. and regulations? 18 Disclosure of violations or irregularities There is no government agency that is charged with enforcing ‘foreign To what extent must companies disclose violations of bribery’ laws and regulations. However, the CPCCS has the authority to anti-bribery laws or associated accounting irregularities? investigate and report on these activities to foreign governments. The CPCCS is required to prepare and present initial legislation, which may Not applicable. include foreign bribery issues. It has not yet done so. 19 Prosecution under financial record keeping legislation 11 Leniency Are such laws used to prosecute domestic or foreign bribery? Is there a mechanism for companies to disclose violations in Ecuador has ‘illicit enrichment’ laws for public functionaries. There are exchange for lesser penalties? now patrimonial assets reporting requirements, which could be the basis No. for undocumented enrichment criminal enforcement. In May 2011, the country voted in favour of criminalising ‘unjustified private enrichment’ as 12 Dispute resolution a separate crime under criminal legislation. The ‘illicit enrichment’ crime is contained on the Organic Integral Criminal Code article 297. It applies to Can enforcement matters be resolved through plea a person who, directly or through another person, obtains for him or her- agreements, settlement agreements, prosecutorial discretion self or for another person, an unjustified increase in assets amounting to or similar means without a trial? more than 200 unified basic general salaries (the official minimum salary The Office of the Public Prosecutor has prosecutorial discretion to decide is currently US$340, and 200 unified salaries is US$68,000). The penalty whether to bring a criminal action, and the accused can be involved in the is imprisonment of between three and five years. investigative process; however, no plea agreements or settlement agree- ments are permitted. 20 Sanctions for accounting violations What are the sanctions for violations of the accounting rules 13 Patterns in enforcement associated with the payment of bribes? Describe any recent shifts in the patterns of enforcement of the The only sanctions are those that are imposed for bribery under the foreign bribery rules. Organic Integral Criminal Code. There are none. 21 Tax-deductibility of domestic or foreign bribes 14 Prosecution of foreign companies Do your country’s tax laws prohibit the deductibility of In what circumstances can foreign companies be prosecuted domestic or foreign bribes? for foreign bribery? There is no such specific prohibition. If foreign companies are doing business in Ecuador, the general manag- ers or legal representatives of those companies may be prosecuted for any Domestic bribery criminal acts committed in Ecuador. Under certain circumstances, owners 22 Legal framework and shareholders of companies may also be prosecuted. Criminal law cov- erage is territorial (Organic Integral Criminal Code, article 14). The ‘com- Describe the individual elements of the law prohibiting bribery mission inside of Ecuador’ includes acts or omissions outside of Ecuador of a domestic public official. that cause effects inside of Ecuador (CC, article 14). The elements are delivery, transfer of, or offer or promise of an undue pay- ment or gift or anything of value, or to take or omit an official action that 15 Sanctions leads to either an appropriate or inappropriate result. What are the sanctions for individuals and companies violating the foreign bribery rules? 23 Prohibitions There are no such sanctions according the current legislation. Does the law prohibit both the paying and receiving of a bribe? The criminal law prohibits both the paying and receiving of a bribe. With 16 Recent decisions and investigations regard to gifts and hospitality, the criminal law requires a corrupt purpose Identify and summarise recent landmark decisions or in order for the act of giving a gift or hospitality to be considered a criminal investigations involving foreign bribery. act. With regard to administrative law, a government functionary’s accept- ance of any gift or hospitality of any value is an administratively punishable There are no recent landmark decisions involving foreign bribery. In 2013, act, but that punishment does not extend to the person who provided the a few of the many ratified court and arbitration proceedings in Ecuador, gift or hospitality; unless it was done for a corrupt purpose because of the the US, Canada, Argentina and elsewhere included claims of bribery and government functionary’s position. corrupt acts of officials and of private individuals. 24 Public officials Financial record keeping How does your law define a public official and does that 17 Laws and regulations definition include employees of state-owned or state- What legal rules require accurate corporate books and records, controlled companies? effective internal company controls, periodic financial Public officials are natural persons who are employed by any entity of the statements or external auditing? national, regional or municipal government, or who carry out a public func- The Law of Companies and the General Law of the Financial System tion. The definition includes employees of state-owned or state-controlled Institutions and their respective regulations are the laws and regulations companies. Pursuant to the 2010 Organic Law on Public Servants (General that require accurate corporate books and records, effective internal Disposition 18), ‘public servants’, as distinct from a ‘workers’, are ‘all company controls, periodic financial statements and external auditing. persons who in any for or under any title work, provide services or exercise Public contracting and specific industrial areas may have their own books a position or charge, function or office in the public sector, whether or not and records, and auditing requirements. The International Financial freely removable from that position’. Under article 229 of the Constitution, ‘public servants’ also include ‘workers’. Under article 326, ‘public servants’, but not ‘workers’, include those who carry out activities of representation, www.gettingthedealthrough.com 69 ECUADOR Paz Horowitz Robalino Garcés direction, administration or professional in the institutions of the state or in private entities in which a majority of the resources are public resources. Update and trends People who work for any branch of government at any level of government, law enforcement and the military are public officials. Ecuador recently enacted the Organic Integral Criminal Code, which was published in the Official Gazette on 10 February 2014 and came into force on 11 August 2014. It replaced the former Criminal 25 Public official participation in commercial activities Code. Can a public official participate in commercial activities while serving as a public official? Following the Constitution of 2008, and pursuant to the 2010 Organic with imprisonment of between one and three years when they directly or Law on Public Servants, except with rare exceptions for teaching services, indirectly receive or accept an undue economic or other type of benefit public officials cannot participate in commercial or professional activi- for themselves or for other persons (for example, undue rights, quotas, ties while serving as a public official. For instance, judges may not work contributions, rents, interests, salaries, gratifications and so on); receive in private practice or in the private or non-judicial public sector, except for or accept with the purpose of doing, omitting, expediting, preventing or academic teaching. In some government entities, codes of ethics prohibit conditioning activities relative to their functions. Anyone who gives or activities that create conflicts of interest. Medical doctors who work for the promises any undue donation or gift or promise, advantage or economic government are not permitted a private medical practice. benefit or other material benefit in exchange to a public servant for the above purposes is punished with the same penalties as imposed on public 26 Travel and entertainment servants. Article 278 of the Organic Integral Criminal Code sanctions pecula- Describe any restrictions on providing domestic officials tion, which concerns acting under state authority for one’s own benefit. with gifts, travel expenses, meals or entertainment. Do the Public servants and others who act under state authority, and members of restrictions apply to both the providing and receiving of such financial institutions who for their own benefit or for the benefit of third benefits? parties abuse, appropriate, extract, or arbitrarily dispose of real or move- Restrictions are found in the Organic Law on Public Servants (2010). The able property, or public or private monies or other material goods or docu- restrictions apply to both the providing and receiving of such benefits. ments under their control, will be imprisoned for between 10 and 13 years. For extortion, the article 281 of the Organic Integral Criminal Code 27 Gifts and gratuities punishes with imprisonment of between three and five years those who act under state authority and abuse that authority for themselves or for oth- Are certain types of gifts and gratuities permissible under your ers and those who order or demand undue rights, quotas, contributions, domestic bribery laws and, if so, what types? income, interests, salaries or gratifications. Articles 285 and 286 of the Organic Integral Criminal Code punish The law does not permit any type of gift or gratuity. Article 24(k) of the trafficking in influences and offering to traffic in influences. Public serv- Organic Law on Public Servants prohibits ‘in any manner, soliciting, ants who traffic in influences will be imprisoned for between three and accepting or receiving gifts, recompense, presents or contributions in kind five years. Public servants who offer to traffic in influences, in exchange or specie, privileges or advantages because of their functions, for them, for some form of remuneration, will be sanctioned with imprisonment of their superiors or subordinates, without prejudice to these acts constituting between three and five years. crimes or misdemeanours such as misuse of public funds, bribery, extor- Testaferrism is the fraudulent signing by a third party of documents tion or unlawful enrichment’. that acknowledge possession, or ownership documents, to protect the holder of the property or a public servant from a claim of illegal enrichment 28 Private commercial bribery or unjustified private enrichment. The punishment according to article 289 Does your country also prohibit private commercial bribery? of the Organic Integral Criminal Code is imprisonment for between three There is no such prohibition. and five years. Unjustified private enrichment sanction is contained on article 289 of 29 Penalties and enforcement the Organic Integral Criminal Code. This applies to a person who, directly or through another person, obtains for him or herself or for another person, What are the sanctions for individuals and companies violating an unjustified increase in assets amounting to more than 200 unified basic the domestic bribery rules? general salaries (the official minimum salary is currently US$340, and 200 unified salaries is US$68,000). The penalty is imprisonment of between For bribery, article 28 of the Organic Integral Criminal Code establishes three and five years. that public servants who abuse their position or functions will be punished
Bruce Horowitz [email protected] Ernesto Velasco [email protected]
Site Center, Tower 1, 3rd Floor Tel: +593 2 398 2900 Calle del Establo y Calle E Fax: +593 2 398 2999 Cumbayá www.pazhorowitz.com Quito Ecuador
70 Getting the Deal Through – Anti-Corruption Regulation 2015 Paz Horowitz Robalino Garcés ECUADOR
30 Facilitating payments sufficient proof, at least against judicial corruption. Hidden cameras and Have the domestic bribery laws been enforced with respect to recording devices have also been used to uncover illegal facilitation pay- ments to Civil Registry employees. facilitating or ‘grease’ payments? During the first term of the current presidential administration, the Anti- 31 Recent decisions and investigations Corruption Bureau of the executive branch used hidden cameras to video- Identify and summarise recent landmark decisions and tape dozens of payments being made to lower court judges and their clerks, investigations involving domestic bribery laws, including any some of which appeared to be facilitation payments. Constitutional privacy investigations or decisions involving foreign companies. and legal limitations on the recording of personal interactions without the authorisation of both parties appear to have limited the use of these tapes The Chevron cases taking place in Ecuador and other countries have and videos in criminal proceedings; however, it is clear that the govern- included investigations and claims of domestic bribery laws involving ment would prosecute some facilitation payment cases if it could provide domestic and foreign lawyers and corporate entities.
www.gettingthedealthrough.com 71 GERMANY Dr Kai Hart-Hönig Rechtsanwälte
Germany
Kai Hart-Hönig Dr Kai Hart-Hönig Rechtsanwälte
1 International anti-corruption conventions • violation of an official duty: violation of an official duty or – if the act lies within the public official’s discretion – that the exercise of his or her To which international anti-corruption conventions is your discretion is influenced by the offered benefit; country a signatory? • offering, promising or granting a benefit: the offering, promising or Germany is a signatory to the following conventions: granting of a benefit in return for the sought official act or omission; and • United Nations Convention against Corruption; • intent: conditional intent, at least. • OECD Anti-Bribery Convention; • Council of Europe Criminal Law Convention on Corruption; and 4 Definition of a foreign public official • Convention against Corruption of Public Officials of the European How does your law define a foreign public official? Community or Member States of the European Union. Persons are deemed foreign public officials if they are considered acting in 2 Foreign and domestic bribery laws that capacity pursuant to the pertinent domestic law, European law (as to EU public officials) or international law (if judges of international courts Identify and describe your national laws and regulations are concerned) including related case law. However, the domestic law of prohibiting bribery of foreign public officials (foreign bribery the victim state applies only to determine the actual field of activity in the laws) and domestic public officials (domestic bribery laws). national system; whether that field of activity satisfies the definition of a Domestic bribery is prohibited under the German Criminal Code (section public official is exclusively determined by the criteria of the OECD Anti- 331ff). Bribery Convention. This was disputed in Germany, but is now confirmed Bribery of foreign officials is governed by the EU Corruption Act 1998 by a ruling from the German Federal Supreme Court of Justice. in relation to EU officials and by the International Corruption Act 1998. The EU Corruption Act 1998 is also applicable to persons who have The latter acts provide for equating domestic and foreign holders of been appointed to a public authority or other agency or have been commis- a public office – including persons who have been appointed to a public sioned to discharge duties of public administration. authority or other agency or have been commissioned to discharge duties This equally applies to the International Corruption Act 1998, which of public administration – as to the application of German corruption law. is, however, broader in so far as it does not require a formal appointment The purview of the International Corruption Act 1998 is restricted to or commission. offering a bribe relating to official acts the performance of which either violates or would violate official duties or – if the act lies within the public 5 Travel and entertainment restrictions official’s discretion – in the event that the exercise of his or her discretion is To what extent do your anti-bribery laws restrict providing influenced by the offered benefit. foreign officials with gifts, travel expenses, meals or The scope of the EU Corruption Act 1998 also contains the said limita- entertainment? tions, but encompasses the acceptance of a bribe. Domestic bribery – apart from offering or accepting benefits for the Granting benefits to a foreign public official by paying for or arranging performance of an act which does not violate or would not violate the travel or entertainment is prohibited if granted in return for an official act public official’s duties or for the discharge of a duty not connected with a or omission by which the official violated or would violate his or her duties. specific official act or omission – and foreign bribery constitute offences indicative of money-laundering. 6 Facilitating payments Do the laws and regulations permit facilitating or ‘grease’ Foreign bribery payments? 3 Legal framework There is no exception that allows facilitation payments to foreign public Describe the elements of the law prohibiting bribery of a officials. foreign public official. 7 Payments through intermediaries or third parties The elements outlined below amount to an offence of offering a bribe (the elements are similar for accepting a bribe): In what circumstances do the laws prohibit payments through • public official: the beneficiary is a public official or a person who has intermediaries or third parties to foreign public officials? been appointed to a public authority or other agency or has been Payments through intermediaries or third parties are punishable if the commissioned to discharge duties of public administration; elements listed in question 3 are satisfied. Both the principal and the • benefit: any gift, payment or whatever advantage that tangibly or intan- intermediary or third party are subject to criminal liability. gibly improves the position of the public official or a third person in terms of his or her financial, legal or personal situation (eg, increased 8 Individual and corporate liability reputation in relation to peers) and that the public official was not legally entitled to receive; Can both individuals and companies be held liable for bribery • connection between benefit and official act or omission: the ben- of a foreign official? efit is offered in return for the performance of a certain official act or Both individuals and companies can be held liable for bribery of a foreign omission; official.
72 Getting the Deal Through – Anti-Corruption Regulation 2015 Dr Kai Hart-Hönig Rechtsanwälte GERMANY
The company’s liability is dependent upon various circumstances and This has been strongly driven by the US Department of Justice (DoJ). these circumstances are not well defined. Forfeiture is only ordered in the Furthermore, some prosecutors’ offices have adopted a more aggres- event that the company obtained proceeds from the bribery. A corporate sive stance towards pursuing corruption in the wake of the Siemens case. fine can only be imposed if a superior committed a criminal or adminis- Possible sentences have become increasingly stiffer. Prosecutors are press- trative offence (violation of supervisory duties suffices), thereby either ing companies to conduct internal investigations to be disclosed to the infringing the company’s obligations or just enriching the company. A fine prosecution’s office, in order to help overcome any impediments to suc- can be imposed independently of the prosecution of an individual if it can cessful investigations such as complex cases and scarce resources. Thus, be established that an (at least administrative) offence was committed by companies are exposed to risks larger than those posed by the DoJ. This an (unknown) superior. results from two main differences between US and German law. First, under German law, not only the gross profit but the turnover is subject to 9 Civil and criminal enforcement forfeiture; furthermore, forfeiture is mandatory. Second, German law does Is there civil and criminal enforcement of your country’s not provide for any instruments that allow the combination of flexibility and reliability such as deferred prosecution agreements. foreign bribery laws? Prosecutors’ offices have become overzealous in imposing huge cor- Enforcement of foreign bribery laws is only criminal in Germany. porate fines, and have lowered the conviction threshold for imposing cor- However, civil lawsuits can be lodged by the foreign government, for porate fines. The offices have adopted the stance that payments to agents example, by claiming damages for the inflated price of the transaction (also involved in transactions with foreign governments that they believe to be on the grounds of fraud and incitement of, or aiding and abetting, a breach unreasonably high can only be bribes. This is seen as sufficient, irrespec- of fiduciary trust). tive of the absence of a reliable yardstick to gauge adequate payments in order to identify the allegedly bribed public official or a concrete group 10 Agency enforcement of possible addressees. Furthermore, no evidence is required as to which amount of money had been paid to which person, or between which per- What government agencies enforce the foreign bribery laws sons a benefit is offered in return for the performance of a certain official and regulations? act or omission. This flies in the face of the rule of law. What had just been The public prosecution’s offices are the only government agencies respon- seen as only sufficient for instituting criminal investigations (initial suspi- sible for enforcing the foreign bribery laws and regulations. cion) is now considered as satisfying the requirement for pressing charges and even conviction. In terms of procedural law, there is not just a shift 11 Leniency of the burden of proof to the suspect but the suspect has to prove what is simply impossible, namely that no bribery has taken place. Is there a mechanism for companies to disclose violations in exchange for lesser penalties? 14 Prosecution of foreign companies German statute law does not provide for a mechanism to disclose viola- In what circumstances can foreign companies be prosecuted tions in exchange for lesser penalties. The general provisions relevant for for foreign bribery? the determination of sanctions reward the voluntary disclosure of viola- tions with leniency. The criminal liability of companies is limited under German law and is dependent on the wrongdoing and prosecution of individuals. For that 12 Dispute resolution reason one has to start off by asking in what circumstances persons who are working or acting for foreign companies may be prosecuted for foreign Can enforcement matters be resolved through plea bribery, thereby rendering the companies criminally accountable (ie, it is agreements, settlement agreements, prosecutorial discretion irrelevant whether the company involved is a domestic or a foreign one). or similar means without a trial? That said, foreign bribery is subject to German law if the offence Regarding enforcement under German law, one has to clearly distinguish has been conducted in Germany (the bribe offered or handed over to the whether undertakings or individuals are the subject of enforcement. foreign official in Germany or, for example, offered on the phone from a Companies are only subject to criminal law as regards forfeiture; only the German office), the caused result occurred in Germany or if the perpetrator imposition of corporate fines is governed by administrative law. Although is a German citizen. Also, inciting and aiding and abetting bribery are pun- such cases can end up before a criminal court, as a rule the enforcement ishable. German jurisdiction is established if just one part of the criminal of corporate fines – and forfeiture under administrative law – takes place offence has been conducted, or a relevant result has occurred, in Germany. without a trial. This also applies to large-scale cases such as Siemens. This criminal responsibility does not require the bribery to be punishable Bribery cases relating to individual accountability can also be settled under the domestic law pertinent to the foreign official. The responsibility without a trial by means of a penal order or by imposing conditions upon of the acting person triggers a possible liability of the company (subject to the accused. forfeiture under criminal law and liability under administrative law). A criminal court can impose legal consequences in a written penal order without a main hearing upon written application from a public pros- 15 Sanctions ecutor’s office in the case of less serious offences, which include – within What are the sanctions for individuals and companies violating the German legal framework – bribery, fraud and breach of fiduciary trust. the foreign bribery rules? Only fines and a term of imprisonment not exceeding one year can be imposed by a penal order, provided its execution is suspended. Individuals face being punished with a term of imprisonment between The public prosecution’s office may, with the consent of the accused three months and five years. In less serious cases the punishment shall be and the court, dispense with public charges and instead impose conditions imprisonment for not more than two years or a fine. That sanction applies on the accused. These conditions could include requiring the accused to for each count of bribery. Irrespective of the number of counts the total pay compensation or make a payment to the treasury or a charity. term of imprisonment must not exceed 15 years. The more complex and difficult the prosecution case in terms of the Individuals are also subject to forfeiture of the gross profit or revenue resources needed for the investigation, satisfying the burden of proof and obtained as a result of the bribery offence. If the perpetrator acts profes- trying the case, the more inclined the public prosecution’s office will be to sionally or as a member of a gang that was formed for the continued com- settle the case. mission of such acts, extended forfeiture shall apply. As a result, no proof is needed that the objects to be forfeited are proceeds of crime; extended 13 Patterns in enforcement forfeiture can already take place if circumstances justify the assumption that the proceeds or objects were acquired as a result of unlawful acts. Describe any recent shifts in the patterns of enforcement of the Companies are not subject to criminal liability in terms of sentencing foreign bribery rules. but can be subject to confiscation and forfeiture orders (the amount that The most noticeable shifts in the patterns of enforcement are those in equates the gross profit or revenue can be siphoned off; assets of equivalent relation to the enhanced exchange of information and the coordination value may be provisionally secured). of activities between national and international enforcement agencies. www.gettingthedealthrough.com 73 GERMANY Dr Kai Hart-Hönig Rechtsanwälte
Companies may, however, be liable under administrative law that 19 Prosecution under financial record keeping legislation provides for sanctions that are either identical or akin to those provided Are such laws used to prosecute domestic or foreign bribery? by criminal law in other states. Administrative law provides, inter alia, the following measures: forfei- German accounting law is used to prosecute domestic and foreign bribery. ture; corporate fine (up to €1 million for each count of a related criminal If bribes are not granted off the financial statement, the masked entry often offence; the final amount can be tantamount to forfeiture by siphoning amounts to an offence of false accounting or false statements. This is above off the gross profit); definite or indefinite disbarment (may be limited to all a result of the prohibition to deduct bribes from income. Bribes are not tenders for public orders); and revocation of a permission or a licence to disclosed to preserve the deductibility of this expenditure and to avoid operate a certain business. the revelation of bribery by displaying a difference between the expendi- tures in the financial records and the expenditures stated in the financial 16 Recent decisions and investigations statement for tax purposes. Thus, the financial statement is rendered false because the income is wrongly reduced by the amount of the bribes. Identify and summarise recent landmark decisions or investigations involving foreign bribery. 20 Sanctions for accounting violations The German Federal Supreme Court of Justice delivered a decision in the What are the sanctions for violations of the accounting rules Siemens-ENEL case that decided a dispute on how to define a foreign pub- associated with the payment of bribes? lic official. The views that the definition of the victim state or of Germany should apply were refused. In its place, the autonomous definition gov- False reporting may be punished by a fine or by a term of up to three years’ erned by the criteria of the OECD Anti-Bribery Convention (see question imprisonment. 4) should be considered pertinent. Violating the obligation to rectify a tax return with at least conditional The Siemens case is still eclipsing all other cases. On 15 December intent and thereby committing tax evasion can be punished by a fine or a 2008, Siemens settled charges with the DoJ and the US SEC. It agreed term of up to five years’ imprisonment. to pay a combined US$800 million fine. On the same day Siemens also settled charges in Germany, agreeing to pay a US$569 million corporate 21 Tax-deductibility of domestic or foreign bribes fine, subsequent to a penalty of US$287 million already imposed by a Do your country’s tax laws prohibit the deductibility of Munich district court in October 2007. There is an inclination to ignore domestic or foreign bribes? the uniqueness of this case and to emulate the pattern of investigation and sanctioning in cases that are very different, such as MAN. Neither domestic nor foreign bribes may be deducted. MAN settled accusations of bribing foreign officials by agreeing to pay an administrative fine of €151 million. The very mitigating factor was Domestic bribery MAN’s achievements in establishing robust anti-corruption measures, 22 Legal framework which largely minimised recidivism. At the end of December 2011 Ferrostaal settled accusations of Describe the individual elements of the law prohibiting bribery bribing foreign officials as to submarines sold to Greece and Portugal by of a domestic public official. finally agreeing in the trial to pay an administrative fine of €140 million. Ferrostaal’s efforts as to compliance and internal investigations were The following elements constitute an offence of offering a bribe (these deemed the most relevant mitigating factors. elements are similar to those that have to be established for foreign public officials because German law applicable to domestic bribery also applies Financial record keeping to foreign bribery): • public official: the beneficiary is a public official or a person who has 17 Laws and regulations been appointed to a public authority or other agency or has been com- What legal rules require accurate corporate books and records, missioned to discharge duties of public administration; • benefit: any gift, payment or other advantage that tangibly or intan- effective internal company controls, periodic financial gibly improves the position of the public official or a third person in statements or external auditing? terms of his or her financial, legal or personal situation (eg, increased The requirements relating to accurate books and records, effective internal reputation in relation to his or her peers) and that the public official company controls, periodic financial statements and external auditing are was not legally entitled to receive; mainly stated in the German Commercial Code. Additionally, corporate • connection between benefit and official act or omission: the benefit is law also has such provisions, in particular those contained in the German offered in return for the performance of a certain official act or omission; Act on Limited Liability Companies, the German Stock Corporation • violation of an official duty or violation of an official public duty – if the Act, the German Disclosure Act and the German Transformation Act. act lies within the public official’s discretion – that the exercise of his or Moreover, the IFRS and even the Sarbanes-Oxley Act are relevant. her discretion is influenced by the offered benefit; • offering, promising or granting a benefit: offering, promising or grant- 18 Disclosure of violations or irregularities ing a benefit in return for the sought official act or omission; and • intent: conditional intent, at least. To what extent must companies disclose violations of anti- bribery laws or associated accounting irregularities? The scope of corruption law is greater in connection with domestic pub- Companies are not obliged to disclose violations of anti-bribery laws or lic officials because also just granting a benefit to a public official for the associated irregularities. There may, however, be an obligation under com- discharge of a duty that does not include a violation of official duties is mercial or tax law to make such a disclosure. prohibited. Companies have to rectify a financial statement if the mistakes are of such a magnitude that the statement does not present a true and fair 23 Prohibitions view of the net assets, financial position and results of operations and if Does the law prohibit both the paying and receiving of a bribe? the effect of the mistakes cannot be reflected in the forthcoming financial statement. A fresh financial statement must be prepared in the event that Both paying and receiving a bribe or a benefit are prohibited. the financial statement is void. The said obligations could be deemed in place in case of a considerable amount of disguised expenses for bribes. 24 Public officials Under German tax law, a company has to rectify a tax return if its inac- How does your law define a public official and does that curacy is subsequently recognised and the inaccuracy resulted in a tax definition include employees of state-owned or state- reduction. That is especially the case if bribes have been deducted from controlled companies? income. Violating the obligation to rectify a tax return with at least condi- tional intent is deemed criminal tax evasion. A beneficiary of a bribe is considered to be a public official if he or she: • is a civil servant or a judge; • otherwise has an official relationship with the public law function;
74 Getting the Deal Through – Anti-Corruption Regulation 2015 Dr Kai Hart-Hönig Rechtsanwälte GERMANY
Update and trends With regard to private commercial bribery, lawmakers tabled a bill expecting that their products be preferred by using or prescribing them – seeking to expand the scope and impact of the provision (section 299 who are operating under the national health insurance regulations could of the German Criminal Code) by two amendments. Alongside and be considered private commercial bribery. The question was whether independent of the infringement of fair competition as an element the doctors could be deemed agents of the health insurers and therefore necessarily be satisfied to constitute bribery, to date merely a violation could be committing private commercial bribery. Two divisions of the of the employee’s duties towards the principal or company should be German Federal Court disagreed and submitted their cases to the Grand sufficient; an impact on the company’s property by this violation is not Criminal Panel of the Grand Senate, which decided that the doctors necessary. Additionally, private commercial bribery should be included could not be deemed agents of the health insurers (Case No. GSSt in the money-laundering provision’s list of predicate offences. 2/11, 29 March 2012). This was because there was no immediate legal This draft of 4 December 2007 was drawn up in order to translate relationship between doctors and the health insurers; furthermore, the the EU council’s framework decision dated 22 July 2003 and the UN insurers had no right to direct doctors as regards individual cases as to Convention against Corruption of 31 October 2003 into national laws. which drugs (or medical product, etc) they should prescribe. This draft bill was heavily criticised on the grounds that it criminalises Draft bills to fight corruption in the health-care sector failed. This conduct that neither infringes competition nor violates the company’s applies to a draft bill by the Social Democratic Party and by a draft property. However, the government decided in January 2015 on a largely bill of the German government as well as to a suggestion by the Social similar draft bill to be passed on to the Parliament. It is quite likely that Democratic Party to include all health-care professions. The very reason this bill will come into force in 2015. for the failure is that the necessity of a regulation by law is A landmark decision was reached as to the question whether widely contested. payments or other advantages by drug manufacturers to doctors –
• has been appointed to a public authority or other agency; and 27 Gifts and gratuities • has been commissioned to discharge duties of public administration Are certain types of gifts and gratuities permissible under your irrespective of the organisational form fulfilling such duties. domestic bribery laws and, if so, what types? The criteria for defining the third group are far from clear and heavily There are no exceptions for certain types of gifts or gratuities (see ques- disputed. Two general prerequisites are mentioned: there needs to be an tion 26). act of appointment (but not necessarily a formal one) and the duties to be discharged must be public duties. A private undertaking performing its 28 Private commercial bribery duties is considered to be discharging public duties if the company appears Does your country also prohibit private commercial bribery? to be an extended arm of the government. Being wholly owned by the state is just an indicator for the execution of public duties but not a sufficient Under German law the taking and offering of a bribe in private business one. There is a bulk of inconsistent case law providing no precise guidance. transactions is prohibited (section 299ff of the German Criminal Code). Refuse disposal is mainly seen as being a public duty; operating an airport is Giving an unfair preference to another in the competitive purchase of not seen a public duty. Operating railways is considered to be a public duty. goods or commercial services constitutes such a bribe. This also applies to foreign competition. Bribing the owner of a company is not punishable. 25 Public official participation in commercial activities The offence is only prosecuted upon a criminal complaint or if the Can a public official participate in commercial activities while prosecution’s office considers ex officio that it is required to institute crimi- nal proceedings because of a special public interest therein. serving as a public official? The participation of domestic public officials in commercial activities is 29 Penalties and enforcement governed by the constitutional and occupational law pertinent to the pub- What are the sanctions for individuals and companies violating lic service. As a rule, a civil servant has to work exclusively for the public. the domestic bribery rules? Exceptions are subject to approval. Approval will be denied if the activities are too extensive, if the remuneration appears to be unreasonable as to the The penalties and sanctions for domestic public officials who violate activity or compared with the official’s salary, if participation could result bribery laws and regulations are set out in question 15. In the event that in a conflict of interests or is irreconcilable with the role and reputation of benefits are granted just for the discharge of a duty not including a viola- a public official. tion of public duties, as a rule, the term of imprisonment shall not exceed In principle, owning shares in a private company is allowed. three years (instead of five). Prohibitions may be put in place for officials whose remits encompass Penalties and sanctions for the taking or offering of bribes to and by supervising certain lines of business or certain companies. non-officials include the imposition of a fine or a term of imprisonment not exceeding three years. With regard to other sanctions such as forfeiture, 26 Travel and entertainment the provisions discussed in question 15 apply. Describe any restrictions on providing domestic officials with 30 Facilitating payments gifts, travel expenses, meals or entertainment. Do the restrictions apply to both the providing and receiving of such benefits? Have the domestic bribery laws been enforced with respect to facilitating or ‘grease’ payments? Providing domestic officials with gifts, travel expenses, meals or entertain- ment is, regardless of their value, entirely prohibited if these benefits are German law does not provide for an exemption allowing facilitating pay- granted in return for an official act the performance of which violates or ments. Bribery in the form of granting such payments is enforced by the would violate official duties. prosecution’s office. As the public prosecution office has no discretion in If the said benefits are granted just for the discharge of a duty without connection with such matters it must institute criminal proceedings once any violation of public duties then granting such benefits is not punish- it becomes aware of facts that indicate that a criminal offence might be able if it is not explicitly proscribed and could be considered customary committed. and approved by the public. The criteria are far from clear. The case law is heterogeneous. Meals, entertainment, etc, should be adequate for 31 Recent decisions and investigations the event and the position of the official. A small bunch of flowers as a Identify and summarise recent landmark decisions and token of appreciation may be considered customary. The appropriate investigations involving domestic bribery laws, including any threshold value of a customary, publicly accepted gift is disputed (€50 or investigations or decisions involving foreign companies. €25). It is, however, common ground that benefits should not be granted clandestinely. See question 16.
www.gettingthedealthrough.com 75 GERMANY Dr Kai Hart-Hönig Rechtsanwälte
Most of the appealed decisions that have been finally decided by relationship) and permitted sponsorship, hospitality and promotion of a the German Federal Supreme Court have been challenged because of company’s reputation. The CEO of EnBW AG (an energy supply company) the unclear criteria for distinguishing between bribery aimed at a person was accused of having made tickets for games of the football World Cup who has been appointed to a public authority or other agency or has been 2006 available to secretaries of the state of Baden-Württemberg and other commissioned to discharge duties of public administration and target- high-level servants who had also been responsible, for example, for the ing employees relating to private commercial transactions. However, the approvals of power plants. The district court as well as the German Federal German Criminal Code clearly states that this distinction is independent Supreme Court decided that giving the tickets could be considered a selfish of the organisational form chosen to fulfil duties of public administration. promotion. In the event that gifts could be sincerely deemed a means of At centre stage – not in terms of numbers but of public coverage promoting the company’s standing – and not necessarily also a measure to and importance for daily business – are cases relating to the fine line increase the recipients’ goodwill – this has to be assumed to be the purpose to be drawn between bribery (including fostering a climate for a good on the grounds of the in dubio pro reo principle.
Kai Hart-Hönig [email protected]
Hochstrasse 33 Tel: +49 69 920 380 30 60313 Frankfurt am Main Fax: +49 69 920 380 320 Germany www.hart-hoenig.com
76 Getting the Deal Through – Anti-Corruption Regulation 2015 Anagnostopoulos Criminal Law & Litigation GREECE
Greece
Ilias G Anagnostopoulos and Jerina (Gerasimoula) Zapanti Anagnostopoulos Criminal Law & Litigation
1 International anti-corruption conventions is not applicable to acts within the scope of OECD Convention, which To which international anti-corruption conventions is your provides only for acts of active bribery. Article 235 (passive bribery) describes as punishable the act of request- country a signatory? ing or receiving, directly or indirectly through third persons in favour of • The UN Convention against Corruption (Law No. 3666/2008). oneself or others, of benefits of any nature or accepting a promise of such • The Council of Europe Criminal Law Convention on Corruption and benefits in order to act or omit to act in the future or already finished, with Additional Protocol (Law No. 3560/2007). regard to public duties or contrary to these duties. • The EU Convention on the Protection of the European Communities’ Article 236 (active bribery) describes as punishable the act of offering, Financial Interests (Law No. 2803/2000). promising or giving to a public official, directly or indirectly through third • The EU Convention against Corruption involving Officials of the parties in favour of oneself or others, benefits of any nature in order (for the European Communities or Officials of Member States of the European public official) to act or omit to act in the future or a past act or omission to Union (Official Journal C195 of 25 June 1997) (Law No. 2802/2000). act with regard to public duties or contrary to these duties. • The OECD Convention on Combating Bribery of Foreign Public Article 237 of the GCC (bribery of a judge) as described above is also Officials in International Business Transactions (Law No. 2656/1998). applicable to members of the European Court of Justice and the European Court of Auditors. 2 Foreign and domestic bribery laws Article 159 of the GCC (bribery of political officials) is also applicable to members of the European Council or the European Parliament. Identify and describe your national laws and regulations prohibiting bribery of foreign public officials (foreign bribery 4 Definition of a foreign public official laws) and domestic public officials (domestic bribery laws). How does your law define a foreign public official? Foreign bribery Provisions on bribery of foreign public officials first came into force in A public official, according to article 13(a) of the GCC, is the person to 1998, with the ratification of the OECD Convention. This was a stand- whom duties or service is granted (even temporarily) by the state, munici- alone provision. In 2007, through Law No. 3560/2007, which ratified the pal or other state-controlled legal entities. This definition is supplemented Criminal Law Convention on Corruption and Additional Protocol (with with article 263A of the GCC, which contains a detailed (and broad in its further amendments in 2008), a series of amendments were made to the scope) list of individuals who are perceived as public officials. Greek Criminal Code in relation to the basic structure of the provisions on Article 263A (para graph 1d) provides that public officers are also indi- bribery. According to the latest legislation (Law 4254/2014), all provisions viduals that hold office permanently or temporarily under any capacity or of the Greek Criminal Code on bribery are applicable to foreign public offi- status in: bodies or organisations of the EU, including the Commission, the cials. A general provision was added in article 263A of the Greek Criminal European Court of Justice and the European Court of Auditors. Code (GCC) to include officers of international, European and transna- Article 263A (paragraph 2) provides that articles 235 and 236 of the GCC tional bodies, organisations, in accordance with the conventions to which (passive and active bribery) are applicable to: Greece is a party and has ratified with the above-mentioned laws. • officers or other employees of any international or transnational organisation to which Greece participates as well as any individual with power to act on behalf of such an organisation; Domestic bribery • members of parliamentary assemblies of international or transna- The Greek Criminal Code includes a special section on criminal acts by pub- tional organisations of which Greece is a member; lic officials, with bribery being one of them (articles 235, 236 and 237 GCC). • those who exercise judicial, or arbitration powers with international There is also a special provision in Law No. 1608/1950 for acts of bribery courts to which Greece participates; resulting in financial loss of the Greek state. The difference in acts of bribery • any person in public office or service for foreign countries, including resulting to financial loss of the Greek state is heavier sentencing provisions. judges, jurors and arbitrators; and The main provisions of the Greek Criminal Code are: • members of parliaments or assemblies of local governments of other • article 235, which punishes passive bribery; countries. • article 236, which punishes active bribery; • article 237, which punished passive bribery and active bribery involv- 5 Travel and entertainment restrictions ing members of the judiciary; • article 237A, which punishes trading in influence; and To what extent do your anti-bribery laws restrict providing • article 159, which punishes passive bribery of political officers. foreign officials with gifts, travel expenses, meals or entertainment? Foreign bribery Despite the wording of the relevant law, which is broad and may include 3 Legal framework all of the above, anti-bribery legislation does not apply to symbolic gifts or Describe the elements of the law prohibiting bribery of a gifts of courtesy. The difference lies primarily with the scope of the gift and foreign public official. the openness of offering such a gift. However, one could not exclude the application of regulations and laws on corruption in cases of systematic use Articles 235 (passive bribery) and 236 (active bribery) of the GCC are of such gifts (travel expenses, meals, entertainment) in the general context directly applicable to foreign public officials. Article 235 (passive bribery) of seeking to influence a public official. www.gettingthedealthrough.com 77 GREECE Anagnostopoulos Criminal Law & Litigation
6 Facilitating payments No. 4022/2011. The Prosecutor’s Office against Corruption supervises all Do the laws and regulations permit facilitating or ‘grease’ preliminary inquiries related to corruption acts and main investigations according to the provisions of Law No. 4022/2011. These legal changes payments? provide for speedier investigation of such crimes, speedier referral to Past legislation, active for more than 40 years, permitted specific types of trial, instant freezing of assets and full support by all other agencies in companies (mainly in the field of exports or press) to register payments in terms of gathering and processing evidence. Law No. 4022/2011 applies their financial records without reference to invoices or specific transac- to serious crimes (felonies) committed by ministers and deputy ministers, tions (approximately 3 per cent of annual gross income). This was more of members of parliament, deputy officials, public servants, employees with a privilege for these companies to facilitate payments without having the state controlled institutions, etc. The Prosecutor’s Office against Financial obligation to keep supporting documentation (eg, invoices with descrip- and Economic Crimes (previously established by Law No. 3943/2011) is tion of supplied service) or justify the need for such expenses. This option functioning now more in the sphere of tax-related offences and money is no longer available (starting from 1 January 2004) and all payments and laundering. expenses must be duly justified. If not duly registered, such payments The Prosecutor’s Office against Corruption (as well as the investigat- would fall under the category of receiving or giving a gift or benefits indi- ing judges under Law No. 4022/2011) have unrestricted access to privileged rectly through third persons. In addition, this type of payment might be information such as bank records, tax records, stock exchange records, questionable with regard to regulations of taxation and criminal provisions public services records, etc. They can also issue orders for lifting of bank of same (especially in relation to article 19 of Law No. 2523/1997, registra- secrecy for a limited period of time, seize assets, etc. tion of a fictitious or false transaction in tax records). In cases where there are indications of money-laundering, a parallel In addition, rules and regulations for money-laundering may apply investigation may be opened by the prosecuting authorities following infor- if payments are connected to questionable conduct, eg, proceeds of a mation and feedback by the Hellenic Financial Intelligence Unit (FIU). By criminal act. Law No. 3932/2011, FIU is responsible for collecting all information that may be used by the authorities in prosecuting money-laundering, terror- 7 Payments through intermediaries or third parties ism and organised crime financing. Tax and bank privilege does not apply to information requested by the FIU taskforce, which may also request In what circumstances do the laws prohibit payments through foreign authorities to disclose such information. All evidence gathered is intermediaries or third parties to foreign public officials? then forwarded to the Prosecutor’s Office for further processing. Following The broad wording of articles 235 and 236 of GCC (passive and active the latest legislative amendments, the FIU does not proceed with separate bribery) cover gifts or financial benefits in a direct or indirect way given in investigations but is entitled to conduct investigating actions in cases of favour of the perpetrator or others. In addition, both provisions make spe- urgency or when there is need to seize or confiscate assets. cial reference to intermediaries to a bribe. In this view, intermediaries or The National Coordinator against Corruption (a newly established third parties may be held criminally liable if these transactions are carried Independent Authority) is responsible for setting the strategic goals of out within the context of corruption. all competent authorities (prosecutors, investigations, financial police, etc) in the fight against corruption) and propose measures to make anti- 8 Individual and corporate liability corruption policies more effective. Can both individuals and companies be held liable for bribery 11 Leniency of a foreign official? Is there a mechanism for companies to disclose violations in Greek law provides that only individuals may be held liable for a criminal exchange for lesser penalties? act, thus being subject to classic penal punishments (eg, imprisonment). Since 1998, after the passing of Law No. 2656/1998 (OECD Convention), Article 263B of the Greek Criminal Code provides for leniency measures there has been a specific provision for penalties to legal entities benefiting applicable to perpetrators of bribery (either passive or active). If individu- from acts of bribery of foreign public officials in the form of administra- als who have participated in active bribery report the criminal conduct of tive fines. A company (legal entity) bears liability for acts of bribery and the (bribed) official to the authorities and make substantial disclosures as corruption in the form of administrative penalties. Article 51 of Law No. to the official’s criminal acts, they are eligible either to receive a lesser sen- 3691/2008 (against money-laundering) provides for the liability of legal tence (which could be as low as one to three years, instead of imprisonment entities if the acts of active and passive bribery of public officials, politi- of five to 10 years), or to be granted a suspension of criminal proceedings cal officials aor judges were committed in the legal entities’ favour by indi- against them by virtue of a decision of the indicting court or be granted viduals empowered to act on their behalf (as managers or directors) or to suspension of their sentence. make decisions in relation to the company’s activities, etc, and provide There is no general provision for leniency measures applicable to for a series of administrative penalties (eg, fines, prohibition of business companies or legal entities in respect to acts of corruption. It is possible, activities, ban from public tenders, etc). This provision is applicable to however, in view of the ability of the authorities to choose which adminis- perpetrators, accessories and instigators alike. trative penalties will be imposed (see below under 15), to apply the mini- mum fine and no other penalties. 9 Civil and criminal enforcement 12 Dispute resolution Is there civil and criminal enforcement of your country’s foreign bribery laws? Can enforcement matters be resolved through plea agreements, settlement agreements, prosecutorial discretion After ratification of the Civil Law Convention on Corruption in 2001 (Law or similar means without a trial? No. 2957/2001), there are also provisions related to Greek civil law, such as the right to seek compensation, the right to seek annulment of an agree- Plea agreements and settlement agreements are generally not provided ment that has been the result of an act of bribery and protection of civil under Greek law. Plea agreements and settlement agreements are pro- servants from disciplinary punishments because they reported corruption vided for property-related crimes, such as misappropriation of property, practices to higher officials. but not for the acts of bribery. Corruption cases with a substantial factual basis are referred to trial, following the procedure of filing of charges, 10 Agency enforcement investigation and indictment. Tax-related aspects of bribery cases may be What government agencies enforce the foreign bribery laws resolved through settlement agreements. It is noted that it is not unusual in cases of corruption to have parallel charges of money-laundering or tax and regulations? offences. On such occasions, not all charges may be dismissed or resolved Law 4022/2011 provided for a special investigation body (by investigating through settlement agreements with the prosecuting authorities. judges with the first instance court, Athens) responsible for acts of cor- For acts of corruption there are provisions for lesser sentences or ruption. In 2013, pursuant to Law No. 4139/2013, a separate Prosecutor’s even suspension of criminal proceedings against individuals involved in Office was founded for dealing with acts of corruption and to coordinate acts of corruption who give substantial information on acts committed by the investigations conducted by the special investigation judges under Law
78 Getting the Deal Through – Anti-Corruption Regulation 2015 Anagnostopoulos Criminal Law & Litigation GREECE higher-ranking officials, members of the government or judges (see also infrastructure projects and energy production, etc. Some of these cases are question 11). of transnational interest, especially in the field of money-laundering and asset-tracing and freezing. Evidence gathered during the course of investi- 13 Patterns in enforcement gations with regard to Greece’s defence programmes was used for opening Describe any recent shifts in the patterns of enforcement of the proceedings to other countries (eg, Germany and Switzerland) in respect to acts of corruption and money laundering. foreign bribery rules.
There are no remarkable shifts to report in this respect. Financial record keeping 17 Laws and regulations 14 Prosecution of foreign companies What legal rules require accurate corporate books and records, In what circumstances can foreign companies be prosecuted effective internal company controls, periodic financial for foreign bribery? statements or external auditing? Foreign companies as such cannot be criminally prosecuted for foreign bribery. As already mentioned (see question 8), criminal liability lies with The Code of Registration of Tax Records, the Code of Taxation and the individuals and all provisions in relation to companies deal with admin- regulation on money-laundering (last amended by Law No. 3691/2008) istrative measures and penalties, which require some type of business contain the relevant rules. Corporate books and records must be kept in establishment in the country. Prosecution of individuals working with for- a legally defined way. There are certain provisions about what may be eign companies may be sought after in cases that have a link with Greek regarded as a questionable transaction and that may be registered in the public officials (eg, foreign company bribing Greek officials) or interme- accounts. Financial statements are filed with the Revenue Service annually. diaries – acting in Greece – that facilitated bribes to foreign or domestic Statements of value-added tax are filed monthly (for large corporations). public officials. Internal auditors co-sign the annual financial statements, which are veri- fied by an external auditor (who bears the responsibility for the accuracy 15 Sanctions of filed statements). Through recent legislation (Law No. 3842/2010), an effort has been What are the sanctions for individuals and companies violating made to minimise deficiencies in accounting registration as well as the foreign bribery rules? improper registration of transactions. This is done by giving accountants responsibility for accurate registration of available documentation and The basic sanction for individuals in respect to passive bribery is imprison- tax information in respect to business transactions. New legislation is ment (maximum five years) and a fine ranging from €5,000 to €50,000. If currently under discussion on ways to simplify revenue procedures and the perpetrator is committing such acts by profession or repeatedly or the intensify cross-checking of data from various sources (eg, bank accounts, gift or benefit is of a high value, the act is a felony punishable with impris- expenditure and acquired assets). onment for up to 10 years (minimum sentence five years) and a fine ranging Owing to the fact that Greece has been in the process of restructur- from €10,000 to €100,000. ing public debt, taxation and bookkeeping legislation and regulations are If the act is committed contrary to one’s duties, there is provision continuously being amended and a major restructuring of the whole tax for a prison sentence up to 10 years and a fine ranging from €15,000 to system is still in progress. €150,000 and if such acts are committed by profession or repeatedly or the gift/benefit is of a high value, the prison sentence is up 15 years and the fine 18 Disclosure of violations or irregularities ranges from €15,000 to €150,000. As regards the act of active bribery, the basic sanction is imprisonment To what extent must companies disclose violations of anti- (maximum five years) and a fine ranging from €5,000 to €50,000. If the bribery laws or associated accounting irregularities? bribed official acted contrary to his or her duties the perpetrator is the act is a felony punishable with imprisonment for up to 10 years (minimum Anti-bribery laws do not explicitly demand disclosure of violations. In the sentence five years) and a fine ranging from €10,000 to €100,000. context of money-laundering regulations, compliance and internal audit Assets that have been acquired or gained through bribery acts are control, there are obligations to expose and report irregularities related to seized according to article 238 of the GCC. financial records or suspicious transactions. In this respect, individuals who The authorities may impose to legal entities not covered by special are obliged by law to contribute to transparency and corporate ethics are provisions of anti-money laundering legislation the following sanctions: faced with certain dilemmas when coming across a possible case of bribery. • fines ranging from €20,000 to €2 million; Leniency measures are meant to facilitate disclosure of violations or irreg- • permanent suspension of business activities or temporary suspension ularities. Leniency measures apply in principle to individuals who expose of such for a time period of one month to two years; corruption practices and relate to their status as defendants in criminal • prohibition of specific business activities (eg, share capital increase) cases. Corporations may still be liable from a tax point of view; however, for a time period of one month to two years; or they are entitled to initiate procedures for amicable (tax) settlement, which • permanent or temporary ban (one month to two years) from public can significantly reduce any fines imposed. tenders or state funding. 19 Prosecution under financial record keeping legislation For legal entities covered by anti-money laundering legislation (eg, finan- Are such laws used to prosecute domestic or foreign bribery? cial institutions) the law provides for stricter monetary sanctions ranging Financial records are used as means to prove the money trail that usually from €50,000 to €5 million. goes with a case of bribery. Discrepancies in financial records or payments The Administration has the power to impose any of the above meas- without apparent reason may be used as first indications in tracing bribes. ures or all of them. The search and cross-checking of transactions during a financial record audit may facilitate collection of evidence from other jurisdictions and 16 Recent decisions and investigations disclosure of related assets. All this evidence may contribute to substanti- Identify and summarise recent landmark decisions or ating a case of bribery (domestic or foreign). If this is the case, the financial investigations involving foreign bribery. record case (tax offence) will be prosecuted in parallel with a criminal case of corruption. A number of serious cases are still under investigation and a number of others have been opened by the special investigators under Law No. 20 Sanctions for accounting violations 4022/2011. There are pending investigations on bribes of public officials in the health system (for buying hospital supplies from specific suppli- What are the sanctions for violations of the accounting rules ers), a large-scale investigation conducted by several agencies in relation associated with the payment of bribes? to national defence spending (involving ex-ministers and deputy execu- Bribes – if registered in a misleading way in financial records – would fall tives of the Ministry of Defence), investigations into misconduct of pub- under the category of fictitious transactions (from a tax point of view) and lic officials in the energy sector in relation to public procurements of money laundering (from a criminal law point of view). Sanctions for the www.gettingthedealthrough.com 79 GREECE Anagnostopoulos Criminal Law & Litigation tax violation include fines and imprisonment up to 10 years (for amounts • those serving or having office in state-controlled legal entities or even over €150,000). When the fictitious transaction is of a value higher than state-controlled commercial companies providing power, telecommu- €235,000, the company is forced to stop its activities for up to a month. nication and other services of public interest; If the fines are of high value, pending resolution of the taxation dispute, • employees of banks with a seat in the country or individuals who work the state may also freeze part or all assets of the company to secure future for legal entities acting as private companies but have been estab- payment of the fine imposed. lished by the state or a state-owned company; or • people working with private entities if these entities have been 21 Tax-deductibility of domestic or foreign bribes awarded state funding or subsidies. Do your country’s tax laws prohibit the deductibility of 25 Public official participation in commercial activities domestic or foreign bribes? Can a public official participate in commercial activities while Foreign bribes are prohibited transactions and, as such, cannot be reg- serving as a public official? istered in the books of a company. The registration of payments that do not refer to straightforward transactions in the company books could be As a rule, public officials are not allowed to participate in commercial perceived as the registration of fictitious transactions (ie, transactions that activities. This general restriction has some variations depending on the do not correspond – partly or completely – to a sincere and straightforward position of the official, but public officials serving the state administration transaction and are criminally punishable). In addition, there are provisions sensu stricto are not allowed to conduct commercial activities. for administrative fines (up to three times the value of the registered trans- actions) and the filing of criminal charges that may result in imprisonment 26 Travel and entertainment (for deductible expenses, see question 6 for tax policies prior to 2003). Describe any restrictions on providing domestic officials with gifts, travel expenses, meals or entertainment. Do the Domestic bribery restrictions apply to both the providing and receiving of 22 Legal framework such benefits? Describe the individual elements of the law prohibiting bribery Unified practice (see question 5). of a domestic public official. Article 235 (passive bribery) describes as punishable the act of request- 27 Gifts and gratuities ing or receiving, directly or indirectly through third persons in favour of Are certain types of gifts and gratuities permissible under your oneself or others, of benefits of any nature or accepting a promise of such domestic bribery laws and, if so, what types? benefits in order to act or omit to act in the future or already finished, with regard to public duties or contrary to these duties. As in the case of foreign officials, symbolic gifts or gifts of courtesy do not Article 236 (active bribery) describes as punishable the act of offering, qualify as benefits of bribery. In any event, evaluation of the gift is done on promising or giving to a public official, directly or indirectly through third an ad hoc basis, in light of the circumstances of each specific case. persons in favour of oneself or others, benefits of any nature in order (for the public official) to act or omit to act in the future or already finished, with 28 Private commercial bribery regard to public duties or contrary to these duties. Does your country also prohibit private commercial bribery? Article 237 of the GCC (bribery of a judge) describes the punishable act as a request or receipt of gifts or benefits, directly or indirectly through Article 237B of the GCC provides for punishment of bribery in private com- third persons in favour of oneself or others, of benefits of any nature or mercial and business activities. The basic elements of this type of bribery accepting a promise of such benefits in order to act or omit to act in the include benefits or promises to deliver benefits, or advantages to individu- future or already finished with regard to justice administration or dispute als working with companies in the private sector for violating the rules and resolution. obligations of their work. Article 237A (trading in influence) describes as punishable the act of requesting or receiving, directly or indirectly through third persons in 29 Penalties and enforcement favour of oneself or others, of benefits of any nature or accepting a prom- What are the sanctions for individuals and companies violating ise of such benefits as an exchange for exerting improper influence over the domestic bribery rules? officials described in articles 159, 235 and 236 of the GCC. Article 159 of the GCC (bribery of political officials) describes as pun- As already mentioned (see above under 2) legal provisions for active and ishable the act of the act of requesting or receiving, directly or indirectly active bribery are applicable to domestic and foreign public officials alike. through third persons in favour of oneself or others, of benefits of any The basic sanction for individuals in respect to passive bribery is nature or accepting a promise of such benefits in order to act or omit to imprisonment (maximum five years) and a fine ranging from €5,000 act in the future (or an act or omission to act in the past), with regard to to €50,000. If the perpetrator is committing such acts by profession or public duties or contrary to these duties. This provision is applicable to the repeatedly or the gift or benefit is of a high value, the act is a felony punish- Prime Minister, members of the Cabinet, deputy members of the Cabinet, able with imprisonment for up to 10 years (minimum sentence five years) mayors, etc. and a fine ranging from €10,000 to €100,000. If the act is committed in breach of one’s duties, there is provision 23 Prohibitions for a prison sentence up to 10 years and a fine ranging from€ 15,000 to €150,000 and if such acts are committed by profession or repeatedly or the Does the law prohibit both the paying and receiving of a bribe? gift or benefit is of a high value, the prison sentence is up 15 years and the Both passive and active bribery are prohibited by articles 235 and 236 of the fine ranges from €15,000 to €150,000. GCC respectively. As regards the act of active bribery, the basic sanction is imprisonment (maximum five years) and a fine ranging from €5,000 to €50,000. If the 24 Public officials bribed official acted in breach of his or her duties the perpetrator is the act is a felony punishable with imprisonment for up to 10 years (minimum How does your law define a public official and does that sentence five years) and a fine ranging from €10,000 to €100,000. definition include employees of state-owned or state- Assets that have been acquired or gained through bribery acts are controlled companies? seized according to article 238 of the GCC. It is noted that if bribery acts result in financial loss of the Greek state A public official, according to article 13(a) of the GCC, is the person to exceeding €150,000, Law No. 1608/1950 is applied. Sentences for this whom duties or service is granted (even temporarily) by the state, munici- offence are imprisonment up to 20 years and, if the gifts or financial loss pal or other state-controlled legal entities. This definition is supplemented are unusually high or other aggravated circumstances apply, a life sentence by article 263A of the GCC, which has broadened the meaning of public may be imposed. Despite these harsh sanctions, convicted individuals may officials to include:
80 Getting the Deal Through – Anti-Corruption Regulation 2015 Anagnostopoulos Criminal Law & Litigation GREECE benefit from generous rules on the conversion of prison terms to fines, the suspension of same, early conditional release, etc. Update and trends
30 Facilitating payments Detection and prosecution of corruption is one of the main goals of prosecuting and enforcement authorities. Legal provisions in Have the domestic bribery laws been enforced with respect to respect of acts of corruption have been amended thrice in the past facilitating or ‘grease’ payments? three years to conform as much as possible with the international instruments Greece has ratified and adjust to domestic procedures There has been an increase in efforts to detect facilitating or ‘grease’ pay- and regulations in all aspects of anti-money laundering, tax ments using anti-bribery laws and the application of stricter taxation rules. offences and asset recovery policies. On the other hand, continuous Facilitating or grease payments are prohibited; their exposure is usually amendment of existing legislation creates legal uncertainty and the result of cross-checking of tax, financial and other data related to such poses complex issues in respect to pending investigations or ongoing transactions. trial hearings. More generally, it is apparent that an integrated anti- corruption policy is needed, including better coordination of various legal instruments and anti-corruption agencies. 31 Recent decisions and investigations Identify and summarise recent landmark decisions and investigations involving domestic bribery laws, including any investigations related to bribery of health-care officials with regard to med- investigations or decisions involving foreign companies. ical supplies (Johnson & Johnson/De Puy) and public officials, including a Over the past four years, a major investigation is being conducted in former minister, with regard to military expenditure (HDW/Ferrostaal, relation to a multinational company (Siemens) that has reportedly been STN ATLAS and other suppliers of military equipment). Investigations systematically giving money to public officials in order to secure awards have opened against former government officials in relation to facilitating of multimillion-euro agreements with the Hellenic Republic, as well as payments (in the defence sector) and involvement in tax fraud schemes through real estate deals.
Ilias G Anagnostopoulos [email protected] Jerina (Gerasimoula) Zapanti [email protected]
Patriarchou Ioakeim 6 Tel: +30 210 729 2010 10674 Athens Fax: +30 210 729 2015 Greece www.iag.gr
www.gettingthedealthrough.com 81 INDIA AZB & Partners
India
Aditya Vikram Bhat and Richa Roy AZB & Partners
1 International anti-corruption conventions Court has held that a conviction may not be sustainable (Banarsi Dass v To which international anti-corruption conventions is your Respondent: State of Haryana, 2010 (2) ACR 1344 (SC)). The applicability of the PCA extends to the whole of India except the country a signatory? state of Jammu and Kashmir and also to all Indian citizens outside India. India signed the United Nations Convention against Corruption (UNCAC) The substantive provisions of the PCA, read in conjunction with the state- on 9 December 2005 and ratified it on 1 May 2011. Under Indian law, while ment of its extent make it clear that this statute is intended to apply to the central government is competent to enter into treaty obligations to the situations where an Indian ‘public servant’ accepts illegal gratification extent that such treaty obligations affect any justiciable rights of Indian from any person, whether in India or abroad. The PCA does not apply to nationals, it would require an act of the legislature for such obligations the payment of illegal gratifications to foreign officials. to be binding upon Indian nationals. Additionally, India also ratified the Certain proposed amendments to the PCA by way of a bill entitled United Nations Convention on Transnational Organised Crime (UNTOC) Prevention of Corruption (Amendment) Bill 2013 (PCA Amendment Bill) which also mandates the criminalisation of corruption and the bribing of have received cabinet approval and await consideration by parliament. The public officials. PCA Amendment Bill seeks to amend section 19 of the PCA in order to India is also a member of the trilateral India–Brazil–South Africa safeguard former public servants against vexatious litigation by providing Cooperation Agreement (IBSA) to foster cooperation in different public- that proceedings against them require prior sanction from certain named policy sectors, including ‘ethics and corruption combat’ and ‘social respon- authorities. This bill also provides that property acquired by public serv- sibility and transparency’. Cooperation mechanisms under the IBSA ants through corrupt means must be forfeited to the government, and pre- include seminars, meetings, knowledge-sharing, training of civil servants scribes a procedure for attaching such properties before the court passes of one country by another country, cooperation between training institu- judgment. In the context of penalties, it proposes to relate the quantum tions and the establishment of institutions, projects and other joint mecha- of fines to the pecuniary resources of the accused or the value of property nisms. The Corruption Prevention and Strategic Information Secretariat for which the accused is unable to account satisfactorily. Further, this bill has been established under the IBSA to act as a nodal point for topics seeks to amend the definition of ‘criminal misconduct’ under the PCA related to anti-corruption policies. by excluding the act of a public servant obtaining a pecuniary advantage In June 2010 India became a member of the Financial Action Task or valuable thing for any person (including a commercial organisation) Force, a 36-member intergovernmental body that aims to develop national without public interest, on the grounds that it would be difficult for public and international policies to prevent money laundering and terrorism servants to comply with this provision. financing arising, inter alia, out of bribery. Service Rules 2 Foreign and domestic bribery laws In addition to the PCA, most government officials are bound during the Identify and describe your national laws and regulations tenure of their service by service rules related to their conduct and disci- pline (Service Rules). The primary Service Rules applicable to different prohibiting bribery of foreign public officials (foreign bribery classes of officials of the central government of India are: laws) and domestic public officials (domestic bribery laws). • Central Civil Services (Conduct) Rules 1964; The Prevention of Corruption Act 1988 • All India Services (Conduct) Rules 1968; and The Prevention of Corruption Act 1988 (PCA) is the primary law relating • Indian Foreign Service (Conduct and Discipline) Rules 1961. to the prevention of corruption and matters connected therewith. The PCA criminalises the receipt of illegal gratification by ‘public servants’ and These Service Rules, inter alia, prohibit government officials from receiv- the payment of such gratification by other persons. The amplitude of the ing gifts, lavish hospitality, free transport, boarding or other pecuniary offences under the PCA is very wide. The PCA addresses, inter alia, grati- advantages (from persons other than near relatives or personal friends). fication received through intermediaries, gifts and other non-pecuniary A violation of these Service Rules may result in the initiation of discipli- gratifications, and certain conduct described as ‘criminal misconduct’ by nary action that may extend to the termination of service of the concerned public servants. The PCA also provides for the establishment of special official. Such departmental disciplinary proceedings are independent of courts to try offences under the PCA. The Indian Penal Code 1860 (IPC) prosecutions initiated under the PCA. earlier contained sections 161 to 165A, which dealt with offences by or relating to public servants, including the abetment of such offences. The Foreign Contribution Regulation Act 2010 PCA now incorporates these offences and expands their scope. Though The Foreign Contribution Regulation Act 2010 (FCRA) consolidates the the Supreme Court of India has observed that the PCA is social legisla- law regulating the acceptance and utilisation of foreign contribution or tion intended to curb the illegal activities of public servants and there- foreign hospitality by certain individuals or associations or companies fore should be construed liberally, so as to advance its object, and not and prohibits the acceptance of contributions from foreign sources or the in favour of the accused (State of Madhya Pradesh v Ram Singh (2000) 5 acceptance of foreign hospitality by persons including members of legis- Supreme Court Cases 88), it has also laid down that conviction of an latures, office bearers of political parties, judges, government servants or accused under the PCA for acceptance of illegal gratification cannot be employees of government corporations, except with the prior permission of founded on the basis of inference; the offence should be proved against the the central government. The definition of the term ‘foreign source’ under accused beyond all reasonable doubt, either by way of direct evidence or the FCRA is wide and includes any foreign company, or any other foreign even by circumstantial evidence. If such causal link of the chain of events entity, a multinational corporation, a foreign trust or foundation, and a is not established pointing towards the guilt of accused, then the Supreme citizen of a foreign country. The FCRA is administered by a department
82 Getting the Deal Through – Anti-Corruption Regulation 2015 AZB & Partners INDIA within the Ministry of Home Affairs of the government of India. The Foreign The RTI Act has displayed itself as a powerful tool against corruption, Contribution Regulation Rules 2011 were established by the central govern- as witnessed by a report issued by PricewaterhouseCoopers in June 2009, ment under section 48 of the FCRA, with effect from 1 May 2011. which notes the success of RTI applications in, for instance, stopping cor- ruption in procurement by a government company in Bihar (see question Central Vigilance Commission Act 2003 24 for a definition of ‘government company’ in this context). The central government has constituted the Central Vigilance Commission (CVC) pursuant to the Central Vigilance Commission Act 2003. The CVC Whistle Blowers Protection Act 2011 is the primary agency to inquire or cause inquiry to be conducted into The Whistle Blowers Protection Act 2011 (which was passed by Parliament offences alleged to have been committed under the PCA. It is also respon- on 21 February 2014 and received presidential assent on 9 May 2014. It was sible for advising, planning, executing, reviewing and reforming vigilance notified in the official gazette on 12 May 2014) is a legislation that aims to operations in central government organisations. The CVC is required to establish a mechanism to safeguard persons who make a complaint regard- operate impartially and free of executive control. ing an act of corruption or wilful misuse of power by a public authority. In September 2010 the CVC adopted a long-term governmental anti- The identity of the complainant is mandatorily protected under the stat- corruption initiative, the Draft National Anti-Corruption Strategy (Draft ute and any disclosure to the contrary is punishable with imprisonment as Strategy). The Draft Strategy aims at creating a legal and regulatory anti- well as a fine. Once a public interest disclosure is made to the competent corruption framework and strengthening the existing institutions to effec- authority established under the statute, the authority has the power to tively combat corruption. The Draft Strategy is expected to increase the role conduct an inquiry and initiate proceedings accordingly. of institutions such as the CVC, Central Bureau of Investigation, Comptroller and Auditor General, and other anti-corruption agencies in the country. Companies Act 2013 (2013 Act) The 2013 Act (a majority of which was notified on 1 April 2014) also con- Lok Ayuktas tains provisions to prevent corruption and fraud in companies. Section In addition to the CVC, several state governments have established 177 of the 2013 Act requires every listed company to establish a vigilance statutory functionaries known as Lok Ayuktas who are responsible for mechanism for directors and employees to report genuine concerns and investigating complaints against the functioning of the state government to provide for adequate safeguard mechanism against victimisation of per- machinery, including complaints related to bribery and corruption punish- sons who use such a mechanism. Additionally, auditors, cost accountants able under the PCA. and company secretaries are mandatorily required to report any suspected frauds to the central government if they, in the course of the performance Both the CVC and the offices of the Lok Ayuktas are assisted in the of their duties, are of the belief that an offence is being committed against investigation of matters and the enforcement of the PCA by the police. the company by its directors or employees. The 2013 Act also imposes an Offences under the PCA, including those under section 12 of the PCA (dis- obligation on the directors of companies to devise proper systems to ensure cussed later), can be investigated only by senior police officers of specified compliance with the provisions of all applicable laws and that such systems ranks in specified areas and normally need the order of a magistrate of are adequate and operating effectively. There are fines and imprisonment the first class or a metropolitan magistrate before investigation. Further, mandated for violation of the aforesaid provisions. normally such police officers also need a warrant to make an arrest, unless empowered to do so by the state government. Powers are also given to Lokpal and Lokayuktas Act 2013 inspect the suspect’s bank books and accounts. Offences under the PCA, This legislation which was passed on 17 December 2014 and notified on 16 including those under section 13 of the PCA (discussed later), can only be January 2014 provides for the establishment of the Lokpal for the Union tried by special judges appointed under the PCA. In terms of section 19 of and the Lok Ayuktas for the states where Lok Ayuktas (discussed above) the PCA, these special judges can take cognisance of certain offences only had not already been established. These bodies have been empowered to with prior sanction from specified authorities. Certain immunities from investigate allegations of corruption against public functionaries, includ- prosecution under proceedings initiated under section 12 of the PCA are ing offences under the PCA. The jurisdiction of the Lokpal includes the granted to statements made by the bribe giver in a proceeding against a prime minister, ministers, members of parliament and other public serv- public official. Appeals and revision applications from the orders of the ants. Additionally, the legislation imposes an additional obligation on all special judges lie with the High Court. public servants to furnish information relating to assets of which he or she, his or her spouse and dependent children are, jointly or severally, owners Right to Information Act 2005 or beneficiaries to the competent authority under the act within 30 days of The Right to Information Act 2005 (RTI Act) is a law aiming, inter alia, making an oath to enter office and an annual return of assets and liabilities. at transparent governance and prevention of corruption. It prescribes a However, no Lokpal has been appointed under this legislation so far. procedure by which an Indian citizen can apply for and obtain informa- tion held by any public authority, subject to certain defined exceptions in Foreign bribery respect of national interest, legislative privilege and right to privacy. The term ‘public authority’ is widely defined to mean any authority, body or 3 Legal framework institution of self-government created under statute or by government Describe the elements of the law prohibiting bribery of a order, and includes entities owned, controlled or substantially financed, directly or indirectly, by the government. foreign public official. All public authorities are required, in terms of the RTI Act, to make There are no Indian laws that apply to bribery of foreign public officials. The public a variety of information including statements of what information Prevention of Bribery of Foreign Public Officials and Officials of Public and documents they hold, their budget and their rules and regulations. Interest Organisations Bill 2011 which sought to criminalise bribery of They are also required to publish all relevant facts while formulating foreign officials has not received parliamentary approval and has conse- important policies or announcing decisions that affect the public and to quently lapsed. provide reasons for their decisions to the persons affected. The RTI Act sets up a structure comprising information officers to be appointed by each 4 Definition of a foreign public official public authority. Citizens may apply to these officers for information, for a fee. The information officers are required to provide requested information How does your law define a foreign public official? within set timelines, ranging from 48 hours (if the life and liberty of any There are presently no Indian laws that apply to bribery of foreign public person are involved) to 30 days. officials (see question 3). The RTI Act has created information commissions at the central and state levels to enquire into complaints from citizens relating to requesting 5 Travel and entertainment restrictions or obtaining access to records, including refusal of access by the public authority, failure to respond within the prescribed time and demands for To what extent do your anti-bribery laws restrict providing unreasonable fees. The information commissions are empowered to direct foreign officials with gifts, travel expenses, meals or public authorities to comply with the RTI Act, award compensation to the entertainment? complainant and penalise any information officer with fine of up to 25,000 There are no Indian laws that restrict providing foreign officials with Indian rupees or by recommending disciplinary action against him or her. gifts, travel expenses, meals or entertainment (see question 3). However, www.gettingthedealthrough.com 83 INDIA AZB & Partners companies in India may have internal codes of conduct and policies which Furthermore, section 320 of the CrPC provides for the compounding may impose restrictions on providing gifts, travel expenses, meals or enter- of certain specific offences contained in the IPC at the instance of the court tainment to foreign public officials. or the victim of the offence. The composition of any offence under section 320 of the CrPC has the effect of an acquittal of the accused. However, 6 Facilitating payments there is no provision for the compounding of offences under the PCA. Do the laws and regulations permit facilitating or ‘grease’ 13 Patterns in enforcement payments? Describe any recent shifts in the patterns of enforcement of the There are no Indian laws that apply to bribery of foreign public officials. foreign bribery rules. The bill that sought to criminalise the bribery of foreign officials (see ques- tion 3) has not yet been enacted. The prohibition on facilitation or grease There are currently no Indian laws that apply to bribery of foreign payments to Indian public officials is addressed in questions 22 and 31. public officials (see question 3).
7 Payments through intermediaries or third parties 14 Prosecution of foreign companies In what circumstances do the laws prohibit payments through In what circumstances can foreign companies be prosecuted intermediaries or third parties to foreign public officials? for foreign bribery? There are no Indian laws that apply to bribery of foreign public officials (see There are no Indian laws that apply to bribery of foreign public officials (see question 3). The prohibition on payments to Indian public officials through question 3). intermediaries is addressed in question 2. 15 Sanctions 8 Individual and corporate liability What are the sanctions for individuals and companies violating Can both individuals and companies be held liable for bribery the foreign bribery rules? of a foreign official? There are no Indian laws that apply to bribery of foreign public officials (see There are no Indian laws that apply to bribery of foreign public officials (see question 3). question 3). The question of corporate criminal liability in respect of bribes paid to Indian public officials is addressed in question 29. 16 Recent decisions and investigations Identify and summarise recent landmark decisions or 9 Civil and criminal enforcement investigations involving foreign bribery. Is there civil and criminal enforcement of your country’s There are currently no Indian laws that apply to bribery of foreign public foreign bribery laws? officials (see question 3). There are no Indian laws that apply to bribery of foreign public officials (see question 3). Financial record keeping 17 Laws and regulations 10 Agency enforcement What legal rules require accurate corporate books and records, What government agencies enforce the foreign bribery laws effective internal company controls, periodic financial and regulations? statements or external auditing? There are no Indian laws that apply to bribery of foreign public officials (see question 3). Agencies responsible for the enforcement of domestic anti- Indian companies are required to maintain their books of accounts and corruption laws are described in question 2. other business records for a definite period of time under various laws, including: 11 Leniency • the 2013 Act; • Income Tax Act 1961 (Income Tax Act) and other applicable tax statutes; Is there a mechanism for companies to disclose violations in • applicable regulations notified by regulators such as the Securities and exchange for lesser penalties? the Exchange Board of India or the Reserve Bank of India; and There are no Indian laws that apply to bribery of foreign public officials • the Prevention of Money Laundering Act 2002 (PML Act). (see question 3). Provisions of Indian laws relating to disclosure, grant of immunity or pardon to approvers in consideration of their testimony are Companies Act discussed in question 18. The 2013 Act is intended to replace the Companies Act, 1956 in its entirety and has several stipulations on good governance, preventing fraud and cor- 12 Dispute resolution ruption. Several provisions of the 2013 Act have been notified in the course of 2014 and are in now force. In terms of section 134 of the 2013 Act, every Can enforcement matters be resolved through plea balance sheet and profit and loss account of a company (other than a bank- agreements, settlement agreements, prosecutorial discretion ing company) is required to be signed, on behalf of its board of directors, or similar means without a trial? by the two directors of the company including the managing director and the company secretary The section further requires the board of direc- There are no Indian laws that apply to bribery of foreign public officials (see tors of every company to prepare, and lay before its general meeting as an question 3). In the context of domestic prosecutions, persons accused of attachment to its balance sheet, a report with respect to the state of the offences which are not punishable by death or by imprisonment for a term company’s affairs. The directors’ report must contain a ‘directors’ respon- exceeding seven years may apply for a plea bargain in accordance with the sibility statement’, indicating, inter alia, that the directors have selected procedure prescribed by sections 265A to 265C of the Code of Criminal and applied accounting policies, and made prudent judgements, to give a Procedure 1973 (CrPC). However, the option to apply for a plea bargain true and fair view of the company’s affairs. This report is required to be is not available in cases where a person is accused of an offence that is signed by the chairman of the board, and if he is not authorised to do so, by notified by the central government as one that affects the socio-economic at least two directors, including the managing director. condition of the country or is committed against a woman or a child below Further, under section 206 of the 2013 Act, if the Registrar of the age of 14 years. Though the Supreme Court of India has held the PCA Companies (Registrar) is of the opinion that the information or books and to be a social legislation (State of Madhya Pradesh v Ram Singh, cited above), papers disclosed by the company do not represent a full and fair state- the central government has not notified offences under the PCA as affect- ment, the Registrar may call upon the company to produce further books ing the socio-economic condition of the country. Therefore, the option of and documents for his inspection and if satisfied that there is a case, may applying for a plea bargain may be available to persons accused of offences carry out an inquiry into the affairs of the company. Further, the entralc under the PCA.
84 Getting the Deal Through – Anti-Corruption Regulation 2015 AZB & Partners INDIA government, if satisfied that the circumstances warrant it, may order for 18 Disclosure of violations or irregularities the inspection of books and papers by an inspector appointed by it. To what extent must companies disclose violations of The central government, under section 210 of the 2013 Act, can initiate anti-bribery laws or associated accounting irregularities? an investigation of the affairs of the company on the direction of a court Under section 219 of the 2013 Act, the inspector may also investigate the There is no obligation under Indian law to disclose offences under the PCA. company’s subsidiary or holding company, or a company that had been a Witnesses to offences under the PCA are not considered accomplices subsidiary of its holding company, or a holding company of its subsidiary, merely because they did nothing to prevent or disclose the offence, unless at the relevant time. Under the 2013 Act, such companies could include they were under a legal obligation to do so. The PCA or any other criminal companies incorporated outside India. Any failure to disclose books and legislation does not expressly make it mandatory for a person to disclose the records to the inspector for the sake of the investigation is punishable. The commission of an offence under the PCA. It is pertinent to point out in this inspector may also seize any document with the consent of a magistrate. context that section 39 of the CrPC casts an obligation on every person aware Section 182 of the 2013 Act, inter alia, restricts the ability of companies of the commission of or of the intent to commit certain specified offences to to make direct or indirect contributions to a political party, or to any person report such commission to the police or to a magistrate. However, the list of for a political purpose. Section 182 of the Companies Act further requires offences stipulated under this provision does not include any of the offences all companies to disclose the amounts and the recipients of such contri- under the PCA. butions in their profit and loss accounts. A contravention of this section is If the non-disclosure, on the facts of a particular case, amounts to an punishable with imprisonment and a fine. illegal omission under any other law, or is of such a nature that the court Section 447 of the 2013 Act defines ‘fraud’ in a broad manner, to may infer a degree of participation in the offence or abetment, then such a include any act, omission, concealment of any fact or abuse of position person could be prosecuted under section 12 of the PCA. committed by any person or any other person with their connivance in any There may, however, be limited advantages accruing to persons mak- manner, with intent to deceive, to gain undue advantage from, or to injure ing disclosures of offences under the PCA, as described below. the interests of, the company or its shareholders or its creditors or any other Under section 24 of the PCA, immunity has been granted to a person person, whether or not there is any wrongful gain or wrongful loss. Persons against a prosecution under section 12 of PCA if the person has made a convicted of fraud are subject to severe penal consequences and imprison- statement in the course of any proceeding initiated against a public serv- ment for up to a maximum of 10 years. ant under sections 7 to 11, 13 or 15 of the PCA, stating that he has offered or The 2013 Act has several additional provisions in this regard relating agreed to offer any gratification or other valuable thing to any public serv- to the appointment of auditors and their relationship with the company. ant. There does not appear to be any immunity under the PCA simply for making a disclosure. In this regard, please note that the Delhi High Court PML Act (Bhupinder Singh v CBI, 2008 CriLJ 4396) has considerably narrowed the The PML Act (as amended in 2009) criminalises moneylaundering. Money scope of immunity and has held that there is no blanket immunity given laundering is defined as knowingly being involved with, or assisting, any to the bribe giver under section 24 of the PCA. The court held that the process or activity connected with the proceeds of crime and with projecting immunity would be available where the bribe-giver was unwilling to pay such proceeds as untainted property. It further identifies offences under sec- illegal gratification to a public servant and approaches the appropriate law tions 7 to 10 of the PCA as offences whose proceeds are treated as ‘proceeds enforcement agency and pays a bribe in order to entrap the public servant. of crime’. Further, the PML Act defines two categories of acts as ‘offences Under sections 306 to 308 of the CrPC a court may in certain cases with cross-border implications’. The first category covers acts committed pardon a person accused of an offence on condition that such person outside India that are offences both under Indian law and local law, and makes a full and true disclosure of the circumstances related to the com- whose proceeds are remitted to India. The second category covers offences mission of the offence and agrees to tender evidence to that effect at the committed in India whose proceeds are transferred or are attempted to be trial of the offence. transferred abroad. Section 245B of the Income Tax Act provides for the setting up of the The PML Act casts obligations upon banking companies, financial insti- Settlement Commission. A person may at any stage of a case under the tutions, and entities such as brokers, money-changers and casino operators, Income Tax Act make an application for the settlement of cases pending defined as ‘intermediaries’, to maintain records of transactions and of their against him in the prescribed form if: clients’ identities, and furnish such records to an officer appointed by the • the person has furnished the returns of income which he is required to central government for this purpose. furnish under any of the provisions of the Income Tax Act; and • the additional amount of income tax payable on the income disclosed Serious Fraud Investigation Office in the application exceeds 100,000 rupees. The Ministry of Company Affairs (MCA) has set up a regulatory author- ity, the Serious Fraud Investigation Office (SFIO), which is invested with The Settlement Commission may, if it is satisfied that any person who the powers of detecting, investigating and prosecuting white-collar crimes made the application for settlement under section 245C of the Income Tax and frauds with multidisciplinary ramifications or public interest elements Act has cooperated with the Settlement Commission and has made a full where improvements in the system, laws and procedures are possible. The and true disclosure of his income and the manner in which such income has SFIO has statutory recognition and is vested with the powers of the magis- been derived, grant immunity from prosecution for any offence under the trate under section 211 of the 2013 Act. Income Tax Act or under the IPC or any other central acts. Such immunity, While the SFIO primarily investigates matters received from the MCA, however, would not be granted by the Settlement Commission in cases it also has the authority to take up cases on its own. These investigations where prosecution has been instituted under the relevant central legisla- are to be carried out pursuant to section 212 of the 2013 Act. The SFIO also tions before the date of the application under section 245C of the Income takes up investigation of cases of fraud referred to it by the central govern- Tax Act. Typically the Settlement Commission would not grant immunity ment or if a company passes a special resolution stating that the affairs of in relation to prosecutions initiated under the central legislations that do the company are required to be investigated. To date, the SFIO has been not have any material connection or bearing on tax evasion. involved in matters relating to stockmarket frauds. In addition to the above statutes, companies may be guided by appli- 19 Prosecution under financial record keeping legislation cable accounting and company secretarial standards with respect to their Are such laws used to prosecute domestic or foreign bribery? accounting and record retention policies. It must be noted that although none of these laws and standards There are no Indian laws relating to foreign bribery. With the exception of is intended exclusively to check illegal gratification to public servants, reliance on records maintained in accordance with these laws in course of records maintained under these laws and regulations may be summoned prosecutions under the PCA, these laws are not used to prosecute domestic by a competent authority or by a court to be used as evidence for or during bribery. The reliance on such records in the prosecution of domestic bribery an investigation into a charge under the PCA. is discussed in question 17.
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20 Sanctions for accounting violations Domestic bribery What are the sanctions for violations of the accounting rules 22 Legal framework associated with the payment of bribes? Describe the individual elements of the law prohibiting bribery As previously described, the PCA and other laws relating to the payment of of a domestic public official. bribes do not themselves cast any accounting or book-keeping obligations Section 7 of the PCA provides that if, inter alia, a public servant accepts on companies. However, the statutes discussed in question 20 penalise or obtains or agrees to accept or attempts to obtain from any person, for violation of the accounting and disclosure requirements set out by them. himself or for any other person, any gratification (other than legal remu- neration), as a motive for doing or forbearing to do any official act or for Companies Act showing or forbearing to show, in the exercise of his official functions, In terms of section 217(8) of the 2013 Act, the failure by officers of a com- any favour or disfavour to any person or for rendering or attempting to pany to produce the books or furnish any requisite information to the render any service or disservice to any person specified in the section, he inspector despite being required to do so by a competent court or investigat- would be punished with imprisonment for no less than six months but may ing authority is punishable by imprisonment for a term of six months or a extend to five years, along with a fine. The expression ‘public servant’ is fine, which may extend to 100,000 rupees or both, with an additional fine defined in the PCA to include not only persons in the service or pay of the of 2,000 rupees for each day the violation continues. government or remunerated by the government for the performance of Under section 224 of the 2013 Act if it appears to the central government any public duty, but also persons in the service or pay of a local authority that any person in relation to the company has been guilty of any offence for or of a corporation established by or under a central, provincial or state act, which he or she is criminally liable, the central government may prosecute or an authority or a body owned, controlled or aided by the government such person. or a government company, judges, court-appointed arbitrators, and sen- Contributions by a company in contravention of section 182 of the ior office bearers of certain registered cooperative societies that receive, or 2013 Act are punishable, in the case of the company, with fine of up to five have in the past received, any financial aid from any government of India times the amount so contributed, and in the case of officers in default, with or from any corporation owned, controlled or aided by the government. imprisonment for up to six months, as well as a fine. The term ‘gratification’ is not restricted to pecuniary gratifications or Section 448 of the 2013 Act deals with penalties for false statements. to gratifications estimable in money. The Supreme Court of India has given Under this section, where any person knowingly makes a materially false the term its dictionary meaning of satisfaction of an ‘appetite’ or ‘desire’ statement or knowingly omits a material fact from a return, report, cer- (State of Assam v Krishna Rao, AIR 1973 Supreme Court 28). Therefore, tificate, balance sheet, prospectus, statement or other document required strictly speaking, the term can cover an insignificant amount paid to influ- under the act, he shall be punishable with imprisonment for a term that ence the public servant, as long as it is not within the legal remuneration may extend to 10 years, and shall also be liable to pay a fine which shall of the public servant. It has been laid down by the Supreme Court of India be not less than the amount involved in the fraud and may extend to three that the quantum of amount paid as gratification is immaterial and that times the amount involved. This is not a compoundable offence. conviction will ultimately depend upon the conduct of the delinquent public official and the proof established by the prosecution regarding the Income Tax Act demand and acceptance of such illegal gratification (AB Bhaskara Rao v Section 277 of the Income Tax Act states that any person who makes a state- Inspector of Police, CBI, Visakhapatnam 2011 (4) KLT(SN) 35). Judicial prec- ment in any verification under the Income Tax Act, or delivers an account or edents have also held that ‘speed’ payments made to public servants to get statement which is false, and which he either knows or believes to be false, lawful things done promptly are covered within the purview of section 7 or does not believe to be true, shall be penalised with: rigorous imprison- of the PCA (Som Prakash v State of Delhi, AIR 1974 Supreme Court 989). ment for a term from six months to seven years, and a fine, if the amount Therefore, facilitation or ‘grease’ payments made to public servants would of tax which would have been evaded if the statement or account had been not pass muster under the PCA. accepted as true, exceeds 100,000 rupees; and rigorous imprisonment for a Further, section 11 of the PCA deals with scenarios where the public term from three months to three years and a fine, in any other case. servant receives any valuable thing (without consideration, or for a con- In terms of section 277A of the Income Tax Act, any person who with sideration, which he knows to be inadequate), from any person whom he intent to enable any other person to evade any tax, makes or causes to be knows to have been, or to be, or to be likely to be concerned in any pro- made a false entry or statement in any books of accounts or such other doc- ceedings or business transacted or to be transacted by such public servant ument, is liable to be punished with rigorous imprisonment for a term of or having any connection with the official functions of himself (or of any three months to three years and with a fine. public servant to whom he is subordinate, or from any person whom he The Income Tax Act further provides in section 278B (2) that where an knows to be interested in or related to the person so concerned). Such an offence committed by a company and is proved to have been committed offence would be punishable with imprisonment for a term that shall not be with the consent, connivance or neglect of any director, then such direc- less than six months but may extend to five years, along with a fine. tor shall be deemed to be guilty of the offence and shall be liable to be pro- In addition, in terms of section 13 of the PCA, any public servant who ceeded against and punished. habitually accepts gratification or any valuable thing without consideration as set out above, or who dishonestly or fraudulently misappropriates any PML Act property entrusted to him or under his control as a public servant or allows In terms of section 4 of the PML Act, money-laundering is punishable with any other person to do so, or who by corrupt or illegal means, or by abus- rigorous imprisonment for a term of three to seven years and a fine of up ing his position as a public servant obtains for himself or any other person to 500,000 rupees. any valuable thing or pecuniary advantage, or who while holding office as a public servant and without any public interest obtains for any person 21 Tax-deductibility of domestic or foreign bribes any valuable thing or pecuniary advantage, or who, or any person on his Do your country’s tax laws prohibit the deductibility of behalf, is in possession or has at any time during the period of his office domestic or foreign bribes? been in possession of pecuniary resources or property disproportionate to his known sources of income for which he cannot satisfactorily account, In terms of Indian income tax laws, expenses incurred for any purpose that would be liable for criminal misconduct. is an offence or that is prohibited by law are not considered to be incurred Sections 8 and 9 of the PCA also criminalise acts of persons, who for the purpose of the business and are not tax-deductible. Accordingly, although not public servants themselves, accept, or agree to accept or payments for unlawful purposes such as protection money, extortion, attempt to obtain any gratification from another person as a motive or bribes are not permitted to be tax-deductible expenditure. reward to influence a public servant in the discharge of his functions. It is not necessary for the public servant to have been identified or for the grati- fication to have been passed on to the public servant in order to constitute an offence under sections 8 or 9. A bill to amend several provisions of the PCA was tabled in 2013 (PCA Bill 2013). The PCA Bill 2013 has widened the scope of some of the offences punishable under the PCA and made the penal provisions more stringent.
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The PCA Bill 2013 proposes to make it an offence for a commercial organi- 24 Public officials sation to bribe a public servant and prescribed vicarious liability provisions How does your law define a public official and does that for offences by companies and provides for the prosecution of directors, definition include employees of state-owned or managers, secretaries and other officers of companies. state-controlled companies? 23 Prohibitions As discussed in response to question 22, the PCA provides a wide definition Does the law prohibit both the paying and receiving of a bribe? of ‘public servant’, which includes persons in the service or pay of a corpora- tion established by or under a central, provincial or state act, or an authority Both the payment and the receiving of bribes are prohibited by law. or a body owned, controlled or aided by the government or a government Section 12 of the PCA punishes the payer of the illegal gratification company. ‘Government company’ here means any company in which at as an ‘abettor’ in respect of offences under sections 7 and 11 of the PCA. least 51 per cent of the paid-up share capital is held by the central govern- The offence of abetment under section 12 is an independent, distinct and ment or any state governments (or both), as well as the subsidiaries of such substantive offence. In this regard it is important to note that the mens a company. rea or mental state of the bribe giver is important, and it is irrelevant that In terms of the above definition, an employee of a company that is con- the public servant had no authority to commit the particular offence, or trolled by the central or state government, or 51 per cent of whose shares refused to be tempted. The mere offer with the object to offer gratification are held by the central or state government, would be a public servant and is considered sufficient to aggravate the offence, even if no money or other his actions would fall within the purview of the PCA. compensation is produced (Padam Sen v State, AIR 1959 Allahabad 707). The above inclusive definition of ‘public servant’ should be seen in the It is also pertinent to note that whether or not the offence is committed in context of the role played by government-owned companies, commonly consequence of the abetment is irrelevant. A bribe offered to avoid harass- known as public sector units, or PSUs, in the Indian economy. Until India ment is not to be considered as sufficient to reduce the sentence. adopted progressive privatisation as a policy in 1991, several key sectors of its Sections 107 to 116 of the IPC provide what constitutes the offence economy were dominated or monopolised by PSUs. Various decisions were of abetment, the key element of which is described as being ‘instigation’. taken at the PSU level rather than by the government. The prevention of While on the one hand the law requires an element of mens rea, and the corruption among PSUs and their employees was therefore a critical concern. mere association of a person with an accused, in the absence of any further material or instigation, is normally not sufficient to continue abetment, an 25 Public official participation in commercial activities omission can qualify as an abetment if the omission itself is considered Can a public official participate in commercial activities while illegal. It is also significant to note that abetment of an abetment is also an offence under section 108 of the IPC. serving as a public official? Section 20 (2) of the PCA provides that in the case of an offence under Participation by public servants in commercial activities while in service is section 12 of the PCA, if it is proved that any gratification was given or regulated by the terms of the Service Rules applicable to them. For instance, offered to be given or attempted to be given, it shall be presumed that such in the case of officials of the central government bound by the Central Civil person gave or attempted to give such gratification for the purposes men- Services (Conduct) Rules 1964 and the All India Services (Conduct) Rules tioned in section 7 of the PCA. Therefore, in a trial under section 12 of the 1968, there is an express prohibition on the public servants engaging in any PCA, if it can be proved that gratification was given, attempted to be given trade, business, or other employment, holding an elective office, canvassing or offered, there would be a presumption that such gratification was given, for a candidate for an elective office or in support of any business, participat- attempted to be given or offered for the purposes as set out in section 7 ing, except in discharge of his official duties, in the registration, promotion of the PCA. This section therefore alters the normal rule of criminal law or management of any bank, company or cooperative society for commer- that the prosecution has to prove its case beyond reasonable doubt. The cial purposes, and participating in any sponsored private media programme. accused can shift the burden of proof to the prosecution by showing a pre- Prior approval of the central government is required for undertaking any ponderance of probability in his favour. The court is empowered to decline such activity. These Service Rules do, however, carve out limited exceptions to draw such a presumption if the gratification offered, in its opinion, is with respect to participation in honorary social or charitable work, work of extremely trivial, which would negate the drawing of such an inference. literary, artistic or scientific character, amateur sports or in the formation of This was recently reiterated by the Supreme Court, which held that if the associations for these purposes. circumstances provided in the PCA are satisfied, the burden of proof shifts These Service Rules also prohibit speculation by public servants in to the accused to prove that he or she is not guilty (Meghmala v G Narasimha any stock, share or other investments. This prohibition does not extend to Reddy (2010) 8 SCC 383). The Supreme Court has reiterated recently that occasional investments in securities made through registered brokers in the burden to displace the statutory presumption rests with the accused by accordance with applicable laws. bringing on record evidence, either direct or circumstantial to establish Section 168 of the IPC makes it a criminal offence for a public servant with reasonable probability that the money was accepted by him other than to engage in any kind of trade, business, profession or occupation if he is as a motive or reward as referred to in section 7 of the PCA (State of Punjab prohibited from doing so by virtue of his being a public servant. v Madan Mohan Lal Verma AIR 2013 SC3368). The Supreme Court has interpreted section 20 of the PCA to hold that 26 Travel and entertainment the law gives absolute discretion to the court to presume the existence of any fact that it thinks likely to have happened. In that process the court may Describe any restrictions on providing domestic officials have regard to the common course of natural events, human conduct or with gifts, travel expenses, meals or entertainment. Do the public or private business in relation to the facts of the particular case (State restrictions apply to both the providing and receiving of of Andhra Pradesh v C Uma Maheshwara Rao, AIR 2004 Supreme Court such benefits? 2042). A challenge to the constitutional validity of section 20 was rejected As already described, the provisions of the PCA and the Service Rules spe- by the Supreme Court in Veeraswami v Union of India (1991) 3 Supreme cifically prohibit the provision and receipt of gifts and other non-pecuniary Court Cases 655. benefits including free transport, boarding and hospitality from persons Although the PCA does not expressly provide for the punishment of other than close relatives or personal friends and in connection with the persons abetting criminal misconduct by a public servant, the Supreme official duties of the public servant. Court of India has held that the PCA applies to any person who has aided In this regard it is interesting to note that the Service Rules make an and abetted a public servant in possessing property that cannot be satisfac- exception for the receipt by officials of ‘casual meals’ or ‘casual gifts’ or torily accounted for by him, is disproportionate with his lawful income and gifts worth up to a de minimis amount of 1,000 rupees. However, in a pros- in respect of which the public servant is said to have committed criminal ecution for abetment, under the PCA, of persons providing such benefits misconduct (Nallammal and Another v State (represented by the inspector to a public servant, courts would apply an intention or mens rea test and of police) (1999) 6 Supreme Court Cases 559). the monetary worth of the benefit provided, even if insignificant, would not weigh in favour of the alleged abettor. Further, companies typically have internal policies governing offering of gifts and non-pecuniary benefits to public servants.
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27 Gifts and gratuities Are certain types of gifts and gratuities permissible under your Update and trends domestic bribery laws and, if so, what types? The Lokpal and Lokayuktas Act, 2013 was brought into force this year. The legislation provides for the establishment of the Lokpal See question 26. for the Union and the Lok Ayuktas for the states which have been empowered to inquire into allegations of corruption against certain 28 Private commercial bribery public functionaries. A Lokpal has not been appointed under the Does your country also prohibit private commercial bribery? legislation as yet. In India, there is no specific law that covers ‘private commercial brib- ery’. Laws like the PCA are only confined to bribery by ‘public servants’. In addition, the PCA provides for the imposition of a fine in respect of However, as stated above, companies typically prohibit such bribes through all offences of which no limits are prescribed. internal codes of conduct. The PCA does not have a provision which specifically sets out what would happen in the case where offences are committed by a company. Penalties and enforcement 29 Certain legislations contain a specific provision relating to ‘offences by What are the sanctions for individuals and companies violating a company’. Therefore, in the absence of such a specific provision in the the domestic bribery rules? PCA, the normal rule in relation to the criminal liability of companies (as set out below) is applicable following rulings of the Supreme Court. Both companies and individuals can be held liable for violation of the PCA. The Supreme Court of India, relying on its earlier decision in Standard Offences by public servants or abettors under sections 7 to 12 of the Chartered v Directorate of Enforcement, AIR 2005 Supreme Court 2622, held PCA are punishable by imprisonment, the term of which may vary from six that a corporation can be prosecuted for an offence under the PCA and, months to five years. while the company cannot be imprisoned, it can be fined and convicted Criminal misconduct by public servants is punishable under section of an offence under the PCA (CBI v Blue Sky Tie Up Private Limited, Crim 13 of the PCA by imprisonment, the term of which may vary from one year Appeal No. 950/2004). The issue of whether directors of a company can be to seven years. held liable for offences under the PCA is not settled, though arguably direc- Further, section 14 of the PCA provides for the punishment of habitual tors who had the knowledge of such offence and neglected to take steps to offenders of offences punishable under sections 8, 9 and 12 of the PCA by prevent its commission could be held liable. imprisonment, the term of which may vary from two to seven years.
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30 Facilitating payments also demonstrates the time taken for a trial such as this to be completed. Have the domestic bribery laws been enforced with respect to While Mr Yadav has appealed this conviction, he has been granted bail while the appeal is sub judice. facilitating or ‘grease’ payments? In another high-profile case, J Jayalalitha, the former Chief Minister Payments made to get even lawful things done promptly are covered by of the state of Tamil Nadu was convicted in a disproportionate assets case section 7 of the PCA and such laws have been enforced with respect to for possessing properties worth about 67o million rupees. A Special Court facilitation or grease payments. The Supreme Court of India has held ‘we sentenced her to four years imprisonment under sections 13(1)(e) and 13(4) have little hesitation in taking the view that ‘speed money’ is the key to of the PCA and imposed a fine of 1 billion rupees, while additionally bar- getting lawful things done in good time and ‘operation signature’ be it on a ring her from contesting elections for a period of 10 years from the date of gate pass or a proforma, can delay the movement of goods, the economics her conviction. whereof induces investment in bribery’, and that, if speed payments are In the recent decision of Manjeet Singh Khera v State of Maharashtra allowed, ‘delay will deliberately be caused in order to invite payment of a (2013 (10) SCALE 525), the Supreme Court of India acknowledged that in bribe to accelerate it again’ (Som Prakash v State of Delhi, AIR 1974 Supreme cases where the prosecuting authority acts on a complaint against corrup- Court 98 9). Thus ‘facilitation payments’ fall foul of the PCA. tion, conducts its inquiry and lodges a criminal case on the basis of such inquiry, the accused person cannot be said to be prejudiced by the non- 31 Recent decisions and investigations disclosure of the complaint or the identity of the complainant. The petitioner before the Supreme Court was an accused facing trial Identify and summarise recent landmark decisions and under section 13(2) read with section 13(1)(e) of the PCA along with sec- investigations involving domestic bribery laws, including any tion 109 of the Indian Penal Code 1860 before the Special Sessions Court, investigations or decisions involving foreign companies. Greater Bombay, Maharashtra. It was observed that in many situations a In a high-profile conviction, Lalu Prasad Yadav, a former chief minister of person may not want to disclose the identity as well as the information or the state of Bihar, was convicted in what was known as the ‘fodder scam’, complaint passed to the Anti-Corruption Bureau for fear of embarrassment where he was accused of siphoning off funds from the Bihar treasury and or a threat to their life. In these circumstances, the Supreme Court refused fabricating vast herds of fictitious livestock for which fodder, medicines to interfere with the order of the Bombay High Court and dismissed the and animal husbandry equipment was supposedly procured. Mr Yadav was petition filed by the petitioner. The decision marks a departure from the sentenced to five years in prison, in a decision rendered 15 years after the principle of the accused having the right to confront the accuser, and crime was first discovered. The decision has political ramifications and demonstrates a move towards witness and whistle-blower protection.
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Indonesia
Deny Sidharta and Winotia Ratna Soemadipradja & Taher
1 International anti-corruption conventions Foreign bribery To which international anti-corruption conventions is your 3 Legal framework country a signatory? Describe the elements of the law prohibiting bribery of a Indonesia is a signatory to the United Nations Convention Against foreign public official. Corruption 2003 (UNCAC). The convention was signed on 31 October Unlike the US or UK, Indonesia does not have and has not adopted any 2003 and ratified by the Indonesian parliament, in Law No.7 of 2006 foreign corruption or bribery practice legislation. The anti-corruption and regarding Ratification of UNCAC on 18 April 2006. anti-bribery regulations in Indonesia do not expressly regulate the bribery Other than UNCAC, Indonesia is also a signatory to the United Nations of a foreign public official. Convention against Transnational Organized Crime, 2000 (UNTOC). This convention was ratified by the Indonesian parliament in 2009 in Law 4 Definition of a foreign public official No.5 of 2009 regarding Ratification of UNTOC. With regard to anti-corruption, Indonesia has mutual cooperation How does your law define a foreign public official? arrangements with several neighbouring countries, such as: Indonesian anti-corruption laws and regulations do not contain a defini- • South Korea, via a 2006 Memorandum of Understanding (MoU) with tion of a foreign public official. These laws and regulations only define the Korean Independent Commission Against Corruption on Mutual Indonesian public officials (as discussed further below). Cooperation on Combating Corruption; • People’s Republic of China, via an MoU with its Ministry of Supervision; 5 Travel and entertainment restrictions • Vietnam, via an MoU on Cooperation with its Government Inspectorate; and To what extent do your anti-bribery laws restrict providing foreign • India, via a 2013 MoU with its Central Vigilance Commission for officials with gifts, travel expenses, meals or entertainment? International Cooperation on Combating Corruption. There is no express restriction under Indonesian anti-corruption laws and regulations on providing foreign officials with gifts, travel expenses, meals 2 Foreign and domestic bribery laws or entertainment. Indonesian laws and regulations only set out restrictions Identify and describe your national laws and regulations in relation to local public officials. prohibiting bribery of foreign public officials (foreign bribery laws) and domestic public officials (domestic bribery laws). 6 Facilitating payments Indonesia has several relevant anti-corruption laws and regulations, such Do the laws and regulations permit facilitating or ‘grease’ as: payments? • Law No. 11 of 1980 on Bribery (Anti-Bribery Law); Indonesian laws and regulations do not permit facilitation or ‘grease’ pay- • Law No. 28 of 1999 on State Management that is Clean and Free from ments to domestic officials. However, the law has not established any Corruption, Collusion and Nepotism (Good Governance Law); specific prohibitions with regard to foreign public officials. • Law No. 31 of 1999 on Corruption Eradication (last amended by Law No. 20 of 2001) (Anti-Corruption Law); 7 Payments through intermediaries or third parties • Law No. 30 of 2002 on the Corruption Eradication Commission (KPK); • Law No. 46 of 2009 on the Corruption Court; In what circumstances do the laws prohibit payments through • Law No. 8 of 2010 on the Prevention and Eradication of Money intermediaries or third parties to foreign public officials? Laundering; and There are no regulations that specifically prohibit or penalise payments • Other regulations and codes of conduct applicable to state apparatus, from intermediaries to foreign public officials. The Anti-Corruption Law government officials or civil servants that prohibit the receiving or only recognises an offence carried out by a third party that attempts to requesting of gifts or payment for their personal benefit. assist or conspire to commit a corruption offence with local public officials. Nowadays, prosecutors tend to rely on the Anti-Corruption Law when 8 Individual and corporate liability dealing with bribery, even though the Anti-Bribery Law has not been annulled. Under the Anti-Corruption Law, any person (including a per- Can both individuals and companies be held liable for bribery son outside Indonesia) who bribes or facilitates the corruption of an of a foreign official? Indonesian official may be guilty of corruption. Further, Indonesian civil Neither individuals nor companies can be held liable for bribery of a servants who are found to accept bribes (including outside Indonesia) for foreign public official. projects related to or in Indonesia may be deemed to have committed an offence. To the extent that a person outside of Indonesia was suspected of 9 Civil and criminal enforcement breaking the Anti-Corruption Law, the KPK would then rely on any mutual legal assistance agreements executed between Indonesia and the relevant Is there civil and criminal enforcement of your country’s country. foreign bribery laws? Indonesian law does not expressly regulate the bribery of non- No, there is regulation or enforcement of any regulations in relation to the Indonesian or foreign public officials. bribery of foreign public officials.
90 Getting the Deal Through – Anti-Corruption Regulation 2015 Soemadipradja & Taher INDONESIA
10 Agency enforcement In essence, the laws require a company to prepare and maintain various What government agencies enforce the foreign bribery laws records (including financial reports). The records must: • provide information in respect of the company’s transactions ; and regulations? • be supported with relevant supporting documents as evidence of the As Indonesia does not have any foreign bribery laws or regulations, the relevant transactions; KPK does not have any jurisdiction in relation to bribery of foreign officials. • be signed by a director of the company; • be prepared in accordance with financial accounting standards; 11 Leniency • be prepared within six months of the end of the relevant fiscal year; and Is there a mechanism for companies to disclose violations in • be maintained and kept for a period of at least 10 years after the end of exchange for lesser penalties? the relevant fiscal year.
Indonesian Anti-Bribery Law and the Anti-Corruption Law do not The Corporate Document Law provides that any corporation must prepare expressly allow lesser penalties for companies that voluntarily disclose records that include an annual report, financial report and daily transac- violations. Such companies would remain subject to the full investigation tion journal. and penalties under the Anti-Bribery Law and the Anti -Corruption Law. The Tax Law provides that any company that carries out any business However, Indonesian courts may have a general discretion to consider activity must maintain records that provide the information necessary to mitigating factors such as cooperation with relevant government agencies, calculate its taxable income. The records (including corporate books and when rendering penalties. records) must be prepared truthfully and completely. Under the Company Law, the board of directors must prepare and 12 Dispute resolution maintain annual accounts of the company, including a financial statement Can enforcement matters be resolved through plea and other relevant records. The financial statement must be prepared in agreements, settlement agreements, prosecutorial discretion accordance with the relevant Financial Accounting Standard and for cer- tain types of company, the company financial records must be audited by a or similar means without a trial? registered public accountant. Indonesian laws and regulations do not expressly allow any formal plea agreements, settlement agreements or prosecutorial discretion as a means 18 Disclosure of violations or irregularities to avoid trial. All sanctions must be imposed following a full trial. To what extent must companies disclose violations of anti-bribery laws or associated accounting irregularities? 13 Patterns in enforcement Describe any recent shifts in the patterns of enforcement of the The relevant regulations do not contain any express obligations on a com- pany to disclose violations of anti-bribery laws or associated accounting foreign bribery rules. irregularities. As far as we aware, there are no current plans to introduce any foreign However, under the Indonesian Criminal Procedures Law, in certain bribery rules in Indonesia. criminal cases, ie, corruption, the investigator (the Attorney General’s Office or KPK) is authorised to search and confiscate a company’s financial 14 Prosecution of foreign companies records, including supporting documents. In relation to state-owned companies, the state auditor (Badan In what circumstances can foreign companies be prosecuted Pemeriksa Keuangan) may investigate a state-owned company’s financial for foreign bribery? records to obtain information on whether there are irregular payments that Foreign companies cannot be prosecuted in Indonesia for foreign bribery. might have caused losses to the state. A company may only be prosecuted in Indonesia if it violates the Anti- Corruption Law or the Anti-Bribery Law in relation to domestic officials. 19 Prosecution under financial record keeping legislation Are such laws used to prosecute domestic or foreign bribery? 15 Sanctions Legislation in respect of financial reporting as mentioned above is not What are the sanctions for individuals and companies violating generally used to prosecute either domestic or foreign bribery. Any act of the foreign bribery rules? bribery generally falls within the remit of the Anti-Corruption Law. As Indonesia does not have regulations that cover bribery of foreign If there is an allegation that a company is involved in corruption, any officials, there are no sanctions under the Indonesian laws and regulations misleading information or incorrect record on the company’s transactions for the violation of foreign bribery rules. provided in its financial record may lead to further investigation or could be used as evidence by the investigator. 16 Recent decisions and investigations The financial report is usually used as supporting evidence in an anti- corruption case. Identify and summarise recent landmark decisions or investigations involving foreign bribery. 20 Sanctions for accounting violations We are not aware of any investigations carried out by the KPK that involved What are the sanctions for violations of the accounting rules the bribery of foreign officials or any Indonesian court cases that related to associated with the payment of bribes? the bribery of foreign officials. There are no specific sanctions for violation of the accounting rules associ- Financial record keeping ated with the payment of bribes. If the bribes involve a local public official, they would be subject to the Anti-Corruption Law. 17 Laws and regulations What legal rules require accurate corporate books and records, 21 Tax-deductibility of domestic or foreign bribes effective internal company controls, periodic financial Do your country’s tax laws prohibit the deductibility of statements or external auditing? domestic or foreign bribes? Companies in Indonesia (domestic or foreign investment companies) are As bribery is prohibited under prevailing laws and regulations, the tax law required to maintain their financial records as set out under the following does not make provision for any deductibility for bribery. regulations: However, it is technically possible for a company that engages in • Law No. 8 of 1997 on Corporate Documents (Corporate Documents bribery to treat such bribes as a ‘cost’ that can be accrued in its records and Law); may be used to reduce its tax liability. • Law No. 16 of 2000 on Tax (and its amendment) (Tax Law); and However, under the Public Accountants Law, a public accountant • Law No. 40 of 2007 on Limited Liability Companies (Company Law). who manipulates or assists in manipulating data or provides misleading www.gettingthedealthrough.com 91 INDONESIA Soemadipradja & Taher data, will be subject to administrative and/or criminal sanction (fines or Employees of a state-owned or state-controlled company would be deemed imprisonment). to be civil servants as they receive a salary or wage from a corporation that receives support from the state or regional finances or uses capital or facili- Domestic bribery ties from the state or the public. Further, the Good Governance Law defines a member of the ‘state 22 Legal framework apparatus’ as an official who performs the duties of government (execu- Describe the individual elements of the law prohibiting bribery tive), legislature or judiciary, and any other official who has duties in of a domestic public official. relation to state operations (such as ambassadors, governors, regents, etc).
Under the Anti-Bribery Law and Anti-Corruption Law the main elements 25 Public official participation in commercial activities of bribery of a domestic public official are: • giving or promising something to a public official or state apparatus; Can a public official participate in commercial activities while with the aim of persuading the official to do something or not do some- serving as a public official? thing which would then violate his or her obligations; or because of or In the absence of a permit from its supervisor, generally a public official in relation to something in violation of his or her obligation, whether or may not participate in commercial activities while serving as a public not it is done because of his or her position; official. • providing a gratuity to a civil servant or public official in relation to his In addition to the above, under the Disciplinary Regulation, public or her position and contrary to his or her official duties and obligations; officials are prohibited from working in foreign companies, foreign con- • a gratuity would include the giving of money, goods, discounts, com- sultancy companies or foreign non-governmental organisations. Public missions, non-interest-bearing loans, travel tickets, accommodation officials are also prohibited from engaging in activities together with their facilities, free medical care and other facilities, whether these are given superiors, peers, subordinates, or other persons inside and outside their in Indonesia or abroad, by electronic or non-electronic means; work environment for the purpose of personal, group, or others benefits, • any form of illegal act of making a profit for an official him or herself, directly or indirectly detrimental to the country. another person or a corporation, which can possibly incur losses to state finances or the economy; or 26 Travel and entertainment • under a Government Regulation regarding Rules of Public Officer Discipline (Disciplinary Regulation), a public official is prohibited Describe any restrictions on providing domestic officials from accepting any gift in any form from anyone and the giving of this with gifts, travel expenses, meals or entertainment. Do the gift by the person is known or should have been known to be related to restrictions apply to both the providing and receiving of such or with the civil servant’s position or duty. benefits?
The Anti-Corruption Law provides that any gift given to a public official The Anti-Corruption Law recognises the definition of ‘gratuity’ as a gift to in relation to his or her duties and responsibilities that is not disclosed to civil servants or state apparatus in the widest sense of the term, including the KPK by the relevant official will be deemed to be bribery. The KPK has the giving of money, goods, discounts, commission, non-interest-bearing the discretion to allow an official to receive a gift provided that the official loans, travel tickets, accommodation facilities, free medical care and other discloses it (after the KPK declares such gift is not a bribe). facilities. The restriction applies to both the providing and receiving of such 23 Prohibitions benefits.
Does the law prohibit both the paying and receiving of a bribe? 27 Gifts and gratuities Yes, the Anti-Bribery Law and Anti-Corruption Law prohibit the acts of Are certain types of gifts and gratuities permissible under your paying and receiving of a bribe. domestic bribery laws and, if so, what types?
24 Public officials Gifts that do not have any relation to the civil servant’s or member of state apparatus’ duties and responsibilities are acceptable, provided that the How does your law define a public official and does that civil servant obtains permission from the KPK to accept or retain the gift. definition include employees of state-owned or state- Even birthday or wedding gifts given to civil servants must be reported to controlled companies? the KPK. ‘Public official’ or ‘civil servant’ has several definitions under the laws and regulations. The definition can overlap and the usage would be inter- 28 Private commercial bribery preted on a case-by-case basis. Does your country also prohibit private commercial bribery? The Civil Servants Law defines civil servants as Indonesian citizens There is no formal regulation for private commercial bribery under who are hired to fulfil a duty of an office of the state or are given other Indonesian law. The measures covered under the Anti-Corruption Law stately duties and are salaried in accordance with the prevailing laws and would only apply to private commercial bribery where there is a loss regulations. This comprises central and regional government officials, incurred by state finances or the economy. members of the armed forces and members of the police. The Indonesian Criminal Code defines civil servants as all persons 29 Penalties and enforcement who have been elected or who, by reason other than as a result of elec- tion, are members of a legislative body, a government body or a body of What are the sanctions for individuals and companies violating the peoples’ representatives formed by or on behalf of the government. the domestic bribery rules? The Criminal Code also states that judges, chairpersons and members of religious councils, and any person who joins the armed forces will also be Where corruption is found under the Anti-Corruption Law, the court may viewed as a civil servant. order: fines of between 50 million rupiah and 1,000 million rupiah, and The Anti-Corruption Law defines a civil servant as: imprisonment for up to 20 years or life imprisonment; under certain spe- • a civil servant as meant in the Civil Servants Law; cial circumstances, life imprisonment or the death penalty can be imposed. • a civil servant as meant in the Indonesian Criminal Code; Corporate bodies (eg, companies, unincorporated associations, • a person who receives a salary or wage from the finances of the state or partnerships, etc) may also be prosecuted for corruption offences. In the the regions; event that the corruption is committed by or on behalf of a corporation, • a person who receives a salary or wage from a corporation that receives the prosecution and punishment may be made against the corporation or support from the finances of the state or the regions (ie, a state-owned its management. The primary punishment that can be pronounced against enterprise); or a corporation is only fines, but the maximum punishment is increased by • a person who receives a salary or wage from another corporation that one-third for corporations. uses capital or facilities from the state or the public. Based on the elucidation of the Anti-Corruption Law, ‘management’ means the organ of a corporation that performs the management of the
92 Getting the Deal Through – Anti-Corruption Regulation 2015 Soemadipradja & Taher INDONESIA
Update and trends
The KPK and the mining industry The KPK and illegal fishing Mining and oil and gas industries make a significant contribution to In early 2015, the Minister of Maritime Affairs and Fisheries visited state income in Indonesia. In order to enhance state income, the KPK the KPK office to seek the KPK’s support in combating corruption in is actively investigating any potential corruption within the mining and the fishery industry. The Minister requested the KPK to investigate oil and gas sectors. In this matter, the KPK has been working closely and prosecute those who impeded attempts to combat illegal fishing with tax authorities, the police and other governmental institutions, in Indonesian waters. The KPK has expressed its support and the two such as regional governments, to investigate potential corruption within institutions will work together closely. No official platform or guidelines the mining and oil and gas sectors. The main purpose is to root out have been formed but in this matter the KPK will encourage other the ‘mafia’ in the mining and oil and gas industry. As part of its plan institutions such as the Indonesian marines, police and sea police to to undertake a comprehensive study of management of the mining support the Minister’s efforts and programme to combat corruption. industry, the KPK will take a closer look at all stakeholders in the mining and oil and gas sectors. It is believed this new approach will be able to clean up the mining sector and bring greater certainty for investors.
corporation in accordance with its Articles of Association, including those 31 Recent decisions and investigations who actually have authority and participate in making the corporation’s Identify and summarise recent landmark decisions and policies or decisions that led to the relevant alleged criminal actions. This investigations involving domestic bribery laws, including any could mean the senior management of the company, members of the investigations or decisions involving foreign companies. board of directors or board of commissioners or (in some rare cases) the company’s shareholders. In reality, the definition of ‘management’ will be Recent decisions of the court demonstrate that the government is show- treated on a case-by-case basis, based on the relevant facts and the spe- ing its commitment to fighting corruption and becoming more intolerant cific corporate governance and decision-making process of the relevant of it. Such developments offer the promise of greater certainty, fairness company. However, typically, ‘management’ would be limited to the com- and transparency in legal disputes involving corruption in Indonesia. The pany’s senior managers and its board of directors. KPK also is actively seeking to combat corruption. These are shown by offi- cials who have been charged, ranging from state prosecutors, Parliament 30 Facilitating payments members, regional government head and even the chairman of the Have the domestic bribery laws been enforced with respect to Constitutional Court. facilitating or ‘grease’ payments? Domestic Although the Anti-Corruption Law does not specifically cover facilitation On 3 May 2012, the Supreme Court sentenced Syamsul Arifin, the Governor payments, it contains wide elements that may cover facilitation payments of North Sumatra Province, to six years’ imprisonment and a fine of 150 as a form of offence. million rupiah, for corruption by misusing the Langkat, North Sumatra, There are a number of cases where the KPK has investigated and pros- regional government budget when he was the head (Bupati) of the Langkat ecuted bribery cases that involved facilitation and or ‘grease’ payments. regional government. The Anti-Corruption Law essentially penalises the act of giving or In 2013, the Corruption Court sentenced a former national police traf- promising something to a civil servant or a state apparatus: with the aim of fic chief, Inspector General Djoko Susilo, to 10 years’ imprisonment and persuading him or her to do something or to refrain from doing something a fine of 500 million rupiah for corruption and money laundering. A large that would violate his obligations, or because of or in relation to something amount of Djoko Susilo’s personal assets were confiscated. The Supreme in violation of his or her obligations, whether or not it is done because of Court then rendered a heavier sentence: 18 years’ imprisonment, a fine his position; and providing a ‘gratuity’ to a civil servant or public official in of 1 billion rupiah, and an obligation to reimburse 32 billion rupiah to the relation to his or her position in return for a favour. state. In December 2013 the Corruption Court sentenced Luthfi Hasan Ishaaq, the then chairman of the Prosperous Justice Party, a political party, to 16 years’ imprisonment and a fine of 1 billion rupiah for corruption and
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www.gettingthedealthrough.com 93 INDONESIA Soemadipradja & Taher money laundering. He was accused of collaborating with his partner, Also last year, the chief justice of the Constitutional Court was arrested Ahmad Fathanah, to help a beef-importing company (PT Indoguna Utama) by the KPK for taking bribes in relation to adjudicating several local elec- acquire a higher beef-import quota from the Ministry of Agriculture. The tion disputes before the court. He was also alleged to have engaged in Corruption Court sentenced Ahmad Fathanah to 16 years’ imprisonment money laundering, based on evidence found by the KPK. Akil resigned and a fine of 1 billion rupiah. from his position following the temporary suspension imposed by the then In late 2013, two tax officials, were sentenced by the Corruption Court President of the Republic of Indonesia. In connection with Akil’s case, the to nine years’ imprisonment and 300 million rupiah in fines. Both were KPK has also arrested Tubagus Chaeri Wardana, husband of the mayor of found guilty of accepting US$600,000 from a company to halt their inves- Tangerang, and brother to the governor of Banten Province, for allegedly tigation in tax problems. The Court also sentenced the director of finance bribing Akil in relation to a dispute handled by the court. of that company to two years and six months’ imprisonment and a fine of 50 million rupiah in the same case. Foreign Investment Company Last year, the Jakarta Corruption Court sentenced a former Secretary The president director of PT Onamba Indonesia (PT OI) a foreign invest- General of the Ministry of Foreign Affairs, Sudjadnan Parnohadiningrat, to ment company duly established under Indonesian law, was arrested on 11 two years six months’ imprisonment and a fine of 100 million rupiah or an May 2012 by the KPK for his alleged involvement in the bribery of a labour additional two months imprisonment. He was found guilty of abusing his court judge. In this matter, a manager of PT OI tried to obtain favourable authority in relation to 12 international meetings and conventions at the treatment from the court in a dispute against its employee. The Corruption Ministry of Foreign Affairs in 2004 and 2005. Court sentenced the director to three years’ imprisonment and a fine of 200 million rupiah.
94 Getting the Deal Through – Anti-Corruption Regulation 2015 Matheson IRELAND
Ireland
Bríd Munnelly, Carina Lawlor and Michael Byrne Matheson
1 International anti-corruption conventions Statutory law To which international anti-corruption conventions is your The principal statutory sources of bribery law in Ireland are: • the Public Bodies Corrupt Practices Act 1889, as amended by the country a signatory? Prevention of Corruption Act 1916 and the Ethics in Public Office Act Ireland has signed and ratified the following international anti-corruption 1995 (the Public Bodies Act); and conventions: • the Prevention of Corruption Act 1906, as amended by the Prevention • the EU Convention on the Protection of the European Communities of Corruption (Amendment) Act 2001 and the Prevention of Corruption Financial Interests (and Protocols) – entered into force on 17 October (Amendment) Act 2010 (the Prevention of Corruption Act). 2002; and • the OECD Convention on Combating Bribery of Foreign Officials There is a degree of overlap between the offences under the Public Bodies in International Business Transactions – entered into force on 21 Act and the Prevention of Corruption Act. November 2003; • the Council of Europe Criminal Law Convention on Corruption – The Public Bodies Act entered into force on 1 February 2004; The principal offences under the Public Bodies Act deal with corruption • the Convention of the Fight against Corruption involving Officials in Irish public office and apply in situations where a corrupt payment is of the European Communities or Officials of Member States of the being made to, or for the benefit of, an office-holder, their special adviser, European Union – entered into force on 28 September 2005; a director, or an employee of an Irish public body. In these cases, it is an • Additional Protocol to the Council of Europe Criminal Law Convention offence for a person to: on Corruption – entered into force on 1 November 2005; • corruptly, • the UN Convention against Transnational Organized Crime – entered • give, promise or offer, solicit, receive or agree to receive, into force on 17 July 2010; and • for himself, or for any other person, • the UN Convention against Corruption – entered into force on 9 • any gift, fee, loan, reward or advantage whatsoever as an inducement December 2011. to, or reward for, • one of the specified public officials above, doing or refraining from Ireland signed the Council of Europe Civil Law Convention on Corruption doing, on 4 November 1999 but has not yet ratified it. • anything in which the public body is concerned.
2 Foreign and domestic bribery laws The term ‘corruptly’ is not defined in the Public Bodies Act. Identify and describe your national laws and regulations prohibiting bribery of foreign public officials (foreign bribery The Prevention of Corruption Act The Prevention of Corruption Act prohibits three offences, the first of laws) and domestic public officials (domestic bribery laws). which is corruptly accepting a gift. It is an offence for an agent or any other Anti-corruption legislation in Ireland generally prohibits bribery of both person to: public officials and private individuals committed in Ireland and, in certain • corruptly, circumstances (ie, where the donor has a connection with Ireland), com- • accept, agree to accept, or agree to obtain, mitted abroad. In contrast with other jurisdictions, the offences provided • a gift, consideration or advantage, for under Irish legislation do not generally distinguish between the bribery • for himself or any other person, of persons working in a public or private body. The only exception is the • as an inducement, reward or on account of the agent doing any act, or presumption of corruption, detailed below, which only applies to public making any omission, officials. • in relation to the agent’s office or position, or his principal’s affairs or Irish laws prohibiting bribery are a combination of common law and business. statutory law dating back to the late 19th century and are spread across a number of pieces of legislation as set out below. Draft terms of legislation The second offence is corruptly giving a gift. In this case, it is an offence were published in June 2012, which, when enacted, will replace the prin- for a person to: cipal pieces of anti-corruption legislation with one consolidated piece of • corruptly, legislation. • give, agree to give or offer, • a gift, consideration or advantage, Common law • to an agent or any other person, At common law, the offences of bribery and attempted bribery are punish- • as an inducement to, or reward for, or otherwise on account of the able by imprisonment or a fine, or both. It is an offence to offer an undue agent doing any act, or making any omission, reward to, or receive an undue reward from, a public official in order • in relation to his office or his principal’s affairs or business. to influence that person in the exercise of his or her duties in that office contrary to the rules of honesty and integrity. The third offence is making a false statement. A person will be guilty of an The common law bribery and attempted bribery offences have not offence if they knowingly give to any agent, or an agent knowingly uses been judicially considered in recent times and prosecuting authorities with intent to deceive his or her principal, any receipt, account or other mainly rely on the statutory law offences. document which contains any statement which is false or erroneous or www.gettingthedealthrough.com 95 IRELAND Matheson defective in any way, and which to that person’s knowledge is intended to licence or authorisation, making a decision relating to the acquisition mislead the principal. or sale of property, or exercising any function under the Planning and A definition of ‘corruptly’ was introduced in 2011 as ‘acting with an Development Act 2000; or improper purpose personally or by influencing another person, whether by • a gift, consideration or advantage is conferred upon a person perform- means of making a false or misleading statement, by means of withhold- ing functions for the National Asset Management Agency (NAMA) by ing, concealing, altering or destroying a document or other information, or a person whose debts have been assumed by NAMA. by any other means’. The phrase ‘improper purpose’ is not defined. The term ‘agent’ is broader than the common-law understanding of Foreign bribery agent and includes domestic and foreign nationals employed by or acting 3 Legal framework on behalf of both private and public bodies, as follows: (i) an employee or person acting for another; Describe the elements of the law prohibiting bribery of a (ii) an office holder or director in a public body or any other person foreign public official. employed by or acting on behalf of the public administration of the Irish state; Bribery of a foreign public official arises in the context of the Prevention of (iii) a member of the Irish parliament or an Irish elected member of the Corruption Act and the Theft and Fraud Act, as described above. Bribery occurring outside of Ireland will only be prosecuted in Ireland European Parliament; if it is carried out by Irish persons or entities or takes place at least partially (iv) the Attorney General, the Comptroller and Auditor General, and the in Ireland. If an Irish person does something outside Ireland which, if done Director of Public Prosecutions; within Ireland, would constitute a corruption offence, that person is liable (v) a judge of the Irish courts; as if the offence had been committed in Ireland. This provision is not reli- (vi) a member of government, or regional or national parliament of any ant on an equivalent offence existing under the laws of the foreign jurisdic- other state; tion and only applies to certain specified Irish persons including: (vii) any member of the European Parliament, the Court of Auditors of the • Irish citizens; European Communities, or the European Commission; • persons who are ordinarily resident in Ireland; (viii) a public prosecutor or judge in any other state; • companies registered under the Irish Companies Acts; (ix) a judge of any court established under an international agreement to • any other body corporate established under Irish law; or which Ireland is a party; • certain defined public officials. (x) a member of an international organisation to which Ireland is a party; (xi) any person employed by or acting on behalf of the public administra- In addition, a person may be tried in Ireland for an offence under either tion of any state; or the Public Bodies Act or the Prevention of Corruption Act if any of the acts (xii) any member or person employed by an international organisation to constituting the offence were partly committed in the state and partly com- which Ireland is not a party. mitted outside Ireland.
The Prevention of Corruption Act also includes a discrete offence relating Theft and Fraud Act to corruption in office which prohibits a public official carrying out a- par The Theft and Fraud Act also contains provision for extraterritorial effect ticular act with a view to later receiving a gift, consideration or advantage where: for themselves or someone else. ‘Public official’ in this context includes • the offender is an Irish citizen or an official working for an EU institu- only the domestic public officials set out at (ii) to (v) in the definition of tion that has its headquarters in Ireland; or ‘agent’ above and so does not apply to foreign public officials. • active corruption is committed against an official who is an Irish citizen As stated above, draft legislation has been published which proposes or directed against an Irish citizen who is a member of the European to remove, reinstate and broaden the Prevention of Corruption Act. This is Commission or Parliament, the Court of Justice of the European considered in more detail in ‘Update and trends’. Communities or the Court of Auditors of the European Communities.
Other legislation 4 Definition of a foreign public official The Criminal Justice (Theft and Fraud Offences) Act 2001 (the Theft and Fraud Act) enshrines in Irish law the offences of active and passive corrup- How does your law define a foreign public official? tion as set out in the First Protocol to the EU Convention of the Protection Prevention of Corruption Act of European Communities Financial Interests. While in many ways simi- The definition of foreign public official is contained within the definition of lar to the offences outlined above, these apply solely to active and passive ‘agent’ contained in the Prevention of Corruption Act, as set out in ques- corruption of officials of the European Communities or member states that tion 2, specifically those at (vi) to (xii). In particular, (xi) refers to any other damages the EU’s financial interests. person employed by or acting on behalf of the public administration of any other state. The Ethics Act The Ethics in Public Office Act 1995 (as amended) (the Ethics Act) places Theft and Fraud Act obligations on Irish public office holders and other senior members of the The definition of ‘official’ under the Theft and Fraud Act is much broader Irish public service, to report and surrender gifts and payments above than in the Prevention of Corruption Act and captures both ‘Community €650. The Ethics Act aims to combat corruption in office by requiring officials’, to include officials, contracted employees and secondees of the public declarations of financial interests, as well as prohibiting the receipt European Communities, and ‘national officials’, which is defined by refer- of gifts, whether or not they are given by the donor with the intention of ence to the definition of national official in each individual member state procuring a certain result or course of action. of the European Communities. However, the elements of the corruption offences under the Theft and Fraud Act are narrower than those in the Presumptions of corruption Prevention of Corruption Act, as set out in question 2. Various presumptions of corruption arise under the Public Bodies Act, the Prevention of Corruption Act and the National Asset Management Agency Other legislation Act 2009. These include where: The Public Bodies Act does not apply in respect of foreign public officials, • a payment was made by a person, or agent of a person, who is seeking as it is directed at the bribery of domestic public officials. to obtain a contract from a government minister or a public body; • an undisclosed political donation above a certain threshold is made to 5 Travel and entertainment restrictions certain specified persons and the donor had an interest in the donee carrying out or refraining from doing any act related to their office or To what extent do your anti-bribery laws restrict providing position; foreign officials with gifts, travel expenses, meals or • a public official is suspected of committing an offence under the entertainment? Prevention of Corruption Act and the person who gave the gift or The Prevention of Corruption Act and the Theft and Fraud Act do not take advantage had an interest in the public official granting or refusing a the value or type of gift, consideration or advantage into account when
96 Getting the Deal Through – Anti-Corruption Regulation 2015 Matheson IRELAND determining if an offence has been committed. Such gifts will fall within • the Criminal Assets Bureau; and the scope of the legislation if provided ‘corruptly’. • the Office of the Director of Corporate Enforcement.
6 Facilitating payments The prosecution of offences is carried out by the Director of Public Do the laws and regulations permit facilitating or ‘grease’ Prosecutions (DPP). The Standards in Public Office Commission (the SIPO Commission) payments? is responsible for the investigation of breaches of the Ethics Act. Following A ‘facilitation payment’ is generally understood to be a payment made to an investigation, if it is of the opinion that an office holder or public serv- expedite or to secure the performance of a routine governmental action. ant the subject of the investigation has committed an offence, the SIPO There is no distinction drawn in Irish law between facilitation payments Commission may make a report to the DPP. and other types of corrupt payments. As such, a facilitation payment will be illegal if it fulfils the elements of the relevant offences. 11 Leniency Is there a mechanism for companies to disclose violations in 7 Payments through intermediaries or third parties exchange for lesser penalties? In what circumstances do the laws prohibit payments through There are no specific provisions to allow companies to disclose viola- intermediaries or third parties to foreign public officials? tions of Irish bribery law in exchange for lesser penalties. Should a com- The offences under the Public Bodies Act, Prevention of Corruption Act pany cooperate with an investigation, such cooperation may be taken into and the Theft and Fraud Act clearly envisage the payment, or receipt, account during sentencing. of corrupt payments through intermediaries. It is therefore immaterial whether the payment is made to an intermediary provided the payment 12 Dispute resolution ultimately made to a foreign or domestic public official fulfils the other Can enforcement matters be resolved through plea elements of the relevant corruption offence. agreements, settlement agreements, prosecutorial discretion or similar means without a trial? 8 Individual and corporate liability Can both individuals and companies be held liable for bribery While cooperation with investigating authorities can be taken into account of a foreign official? as a mitigating factor by a court during sentencing, plea bargaining with prosecutors or the court is not permitted and would be constitutionally Statutory law suspect. This is because, under the Irish Constitution, justice must be The Interpretation Act 2005 provides that in all Irish legislation, references administered in public and the courts have exclusive jurisdiction over to ‘persons’ include references to companies and corporate entities. sentencing matters. In addition, under the Prevention of Corruption Act, an officer of a The DPP has limited discretion under the Criminal Procedure Act company that commits an offence under that legislation will also be guilty 1967 to direct that a matter be disposed of summarily in the District Court of an offence, if the offence is proved to have been committed with the (the court of most limited jurisdiction) where the accused pleads guilty. consent, connivance or approval of the officer, or is attributable to the This would result in a lower penalty being imposed. neglect of the company’s officers. However, to date, there are no recorded prosecutions of companies or their officers under Irish anti-corruption 13 Patterns in enforcement legislation. Describe any recent shifts in the patterns of enforcement of the The draft scheme of the proposed Corruption Bill contains a number foreign bribery rules. of measures relating to the liability of companies for the bribery of an offi- cial and this is discussed further in ‘Update and trends’. In summary, there has been no enforcement of Irish foreign bribery rules as yet. See question 9. Common law A company can itself be found liable under common law for the criminal 14 Prosecution of foreign companies acts carried out by its officers and employees by way of vicarious liability. In what circumstances can foreign companies be prosecuted Vicarious liability deems the company liable for the acts of its employees for foreign bribery? but those acts remain the acts of the employees and not of the company. The company can also be directly liable where crimes of the company’s Irish bribery law does not explicitly provide for the prosecution of foreign controlling officers are viewed as those of the company. This ‘identifica- companies for bribery outside the Irish state. Instead, the Prevention of tion’ doctrine has been accepted by the Irish courts in a civil context, Corruption Act is based on the concept of territoriality – acts committed although there are no reported decisions of the Irish courts in a criminal outside Ireland can only be prosecuted, if certain connections to Ireland context. can be shown, such as the offence having involved the bribery of an Irish official, or the person carrying out the bribe being an Irish citizen or 9 Civil and criminal enforcement company. Is there civil and criminal enforcement of your country’s 15 Sanctions foreign bribery laws? What are the sanctions for individuals and companies violating The Irish legislation set out in question 2 provides for criminal enforcement the foreign bribery rules? of Ireland’s bribery laws as well as civil recovery. There have been no cases against Irish nationals or companies for bribing foreign public officials. Criminal sanctions However, the OECD has noted that three allegations of bribery of foreign Prevention of Corruption Act officials are at a pre-investigation stage and one allegation is currently A person guilty of either a corruption offence or the discrete offence of under investigation by the Irish authorities. corruption in office, under the Prevention of Corruption Act, is liable on summary conviction to a fine not exceeding €4,000 or imprisonment for a 10 Agency enforcement term not exceeding 12 months. A person convicted on indictment is liable What government agencies enforce the foreign bribery laws to an unlimited fine or imprisonment for a term not exceeding 10 years or and regulations? both. An employer summarily convicted of an offence under the whistle- The following bodies can investigate alleged offences under Irish bribery blower protection in the Prevention of Corruption Act can be fined up to law, relating to both foreign and domestic public officials: €5,000 and imprisoned for up to 12 months. Upon conviction on indict- • Garda Bureau of Fraud Investigation (this is an office of the Irish police ment, an employer can be fined up to €250,000 and imprisoned for up to force); three years. • the Revenue Commissioners; www.gettingthedealthrough.com 97 IRELAND Matheson
Theft and Fraud Act Section 243 of the Companies Act 1990 sets out that it is an offence Any person or official who is convicted on indictment of committing either for an officer of a company to destroy, mutilate or falsify any book or docu- active or passive corruption under the Theft and Fraud Acts can be subject ment affecting or relating to the property or affairs of the company. to an unlimited fine or imprisonment for a term of up to five years, or both. Section 10 of the Theft and Fraud Act sets out the offence of false An auditor who fails to report an indication of corruption under the accounting whereby a person who, with the intention of making a gain for Theft and Fraud Act to the Irish police will be guilty of an offence and will themselves or another or of causing a loss to another, provides false infor- be liable on summary conviction to a fine of €2,500 or imprisonment to a mation in relation to a document made or required for any accounting term not exceeding 12 months. purpose, is guilty of an offence.
Seizure of proceeds of crime Effective internal company controls The DPP can obtain an order of forfeiture of a gift or consideration under The Companies Act 1990 and the Companies (Auditing and Accounting) the Criminal Justice Act 1994, where a judge of the Circuit Court is satis- Act 2003 contain a number of provisions relating to internal company con- fied that the gift or consideration is corruptly given or received. An order trols, but the majority are not currently in force. These relate to establish- for forfeiture is not dependent upon criminal proceedings being brought ment of audit committees, confirmation of compliance with obligations but it must be shown that, on the balance of probabilities, the gift or under company and tax law, as well as any other legislation that may ‘mate- consideration has been corruptly received. rially affect the company’s financial statements’. The Irish parliament has Under the Prevention of Corruption Act, a member of the Irish police passed the Companies Act 2014 to consolidate all of the existing Irish com- may seize any gift or consideration which they suspect to be a gift or panies legislation. However, it is not expected that this Act will commence consideration within the meaning of the Prevention of Corruption Act. until July 2015 and therefore the existing provisions remain in place until The gift or consideration can only be detained for 48 hours unless a Circuit commencement. There are no significant changes to the legislation cur- Court order is obtained that extended detention is necessary to properly rently in place referred to in this chapter, although included in the Act’s investigate a corruption offence. A gift or consideration that is so seized provisions are requirements that ‘large companies’ have audit committees. may be ultimately forfeited if a Circuit Court judge is satisfied that, on the The Irish Stock Exchange has determined that companies on the balance of probabilities, the gift or consideration was given in the context exchange must comply with the UK Financial Reporting Council’s of a corruption offence. Combined Code on Corporate Governance or explain non-compliance in The Proceeds of Crime Acts 1996–2005 also contain wide-ranging their annual report. powers for the Criminal Assets Bureau to seize the proceeds of crime. In addition, in respect of credit institutions and insurance under- ‘Proceeds of crime’ are defined as any property obtained or received by takings, the 2010 Central Bank Corporate Governance Code for Credit or as a result of, or in connection with, the commission of an offence, and Institutions and Insurance Undertakings sets out the minimum statutory include the proceeds of corruption. requirements for the governance of such institutions.
Civil Periodic financial statements An employer may have a civil cause of action to recover damages from an The annual accounts of a company must be provided to its members at employee who has been bribed and has caused loss to the business. A per- least 21 days before the company’s annual general meeting. These consist son who obtains a benefit by reason of a fiduciary relationship (which can broadly of a profit and loss account, a balance sheet, a cashflow statement, include employer–employee and principal–agent relationships) may also notes to financial statements and a directors’ report. be required to account on trust for the unauthorised profit made by him. The Department of Enterprise, Jobs and Innovation has issued guid- External auditing ance that a company that violates Irish bribery law may be prevented from Section 160(1) of the Companies Act 1963 requires that Irish companies bidding on any public contract in the European Union. appoint an external auditor, whose duty it is to examine the company’s Where a breach of Irish bribery law is committed by a company in con- accounts and prepare a report that accurately reflects the company’s finan- nection with a project funded by the World Bank and other international cial position. Section 193 of the Companies Act 1990 gives auditors the financial institutions, such companies may be debarred from bidding on right to seek access to company documents and to compel information and contracts funded by the World Bank, International Monetary Fund and explanations from company officers and employees. other international financial institutions, and publicly named. 18 Disclosure of violations or irregularities 16 Recent decisions and investigations To what extent must companies disclose violations of anti- Identify and summarise recent landmark decisions or bribery laws or associated accounting irregularities? investigations involving foreign bribery. Reporting obligations See question 9. The Criminal Justice Act 2011 gives the Irish police increased powers to compel a person or company by court order to produce documents or evi- Financial record keeping dence which relates to corruption offences. 17 Laws and regulations The Criminal Justice Act 2011 also introduced a positive obligation to report to the Irish police information which a person or company knows What legal rules require accurate corporate books and records, or believes might be of material assistance in preventing the commission effective internal company controls, periodic financial of a corruption offence or securing the arrest, prosecution or conviction of statements or external auditing? another person for a corruption offence. Under the Theft and Fraud Act, auditors are required to report to the Accurate corporate books and records Irish police any indications of bribery of an EU public official. In addi- Irish-incorporated companies are required to keep proper books of account tion, the Companies Act 1990 contain a requirement that auditors report under sections 202 to 204 of the Companies Act 1990. The books must: to the Office of the Director of Corporate Enforcement any instances of • correctly record and explain the transactions of the company; suspected indictable offences under the Companies Acts, committed by a • at any time enable the financial position of the company to be deter- company, its officers or agents. mined with reasonable accuracy; • enable the directors to ensure that any annual accounts of the com- Whistle-blower protection pany comply with Irish company law requirements and international A provision for whistle-blower protection was inserted into the Prevention accounting standards; and of Corruption Act in 2010. This protects individuals who report suspected • enable the proper auditing of the company’s annual accounts. violations of the Prevention of Corruption Act and prohibits an employer from penalising the reporting employee. A company, its directors, or both can be held criminally liable for a failure to Additional whistle-blower protection was introduced in the Criminal take all reasonable steps to secure compliance with these requirements or Justice Act 2011 along much the same terms as those inserted in 2010 to the is the cause, by wilful act, of any default by the company of its obligations.
98 Getting the Deal Through – Anti-Corruption Regulation 2015 Matheson IRELAND
Prevention of Corruption Act, and applies to those offences covered by the Public Bodies Act Prevention of Corruption Act. The Public Bodies Act define a public official as being a person who is an The Protected Disclosures Act 2014 applies to all ‘workers’, include- office holder, director or employee of, a public body. ‘Public body’ itself ing employees, contractors, and trainees, provides similar protections to is extensively defined as meaning any county, town or city council, any that under the Irish anti-corruption legislation, although the motivation board, commissioners or other body which has power to act under any for making the disclosure is irrelevant as to whether it is a ‘protected’ legislation relating to local government or the public health or otherwise to disclosure. administer money raised by taxes.
19 Prosecution under financial record keeping legislation Ethics Act Are such laws used to prosecute domestic or foreign bribery? The Ethics Act, by its nature, applies only in respect of public officials. Therefore, it has no single definition of public officials, but rather divides Legislation related to financial record keeping is not used to prosecute public officials into categories, to which differing rules apply. For example, domestic or foreign bribery. However, in situations where offences under an ‘office-holder’ faces more stringent oversight than a public servant. the financial record keeping legislation have occurred, bribery may also An ‘office-holder’ under the Ethics Act generally means a minister in have taken place and such offences could be prosecuted. the Irish government and certain other members of the Irish parliament. The term ‘public servant’ encompasses a wide number of persons, and 20 Sanctions for accounting violations essentially covers all civil servants above the grade of principal officer in What are the sanctions for violations of the accounting rules the civil service, as well as statutory commissioners and officers, ombuds- associated with the payment of bribes? men and employees of state-owned and state-controlled companies.
There are no accounting rules associated with the payment of bribes. Theft and Fraud Act Instead, where a bribe has been given or received, an offence may have The Theft and Fraud Act defines public officials as either: occurred under sections 202 to 204 of the Companies Act 1990, as outlined • an official of the European Community, itself defined as including an in questions 17 and 19. official or contracted employee of the European Communities or a A person found guilty of contravening sections 202 to 204 or section secondee to the European Communities; or 243 of the Companies Act 1990 is liable on summary conviction to a fine not • a national official, including any national official of another member exceeding €2,500 and/or imprisonment to a term not exceeding 12 months state; this is generally understood as being a national official, as defined (six months in the case of sections 203 to 204). Conviction on indictment by the national law of the member state in which the official resides. can lead to a fine of up to €22,220.42 or imprisonment for up to five years, or both. The draft Companies Bill proposes to increase these fines to up 25 Public official participation in commercial activities to €5,000 or imprisonment of a term not exceeding 12 months for sum- Can a public official participate in commercial activities while mary conviction, or both, and a fine of up to €500,000 or imprisonment to a term not exceeding 10 years for a conviction on indictment, or both. serving as a public official? A person found guilty of contravening section 10 of the Theft and Public servants and elected members of the Irish parliament may par- Fraud Act is liable on summary conviction to a fine not exceeding €2,500 ticipate in commercial activities but are required to disclose the following or imprisonment for a term up to 12 months, or both, and, on conviction on interests under the Ethics Act: indictment, a fine or imprisonment for up to 10 years, or both. • occupational income above a certain threshold, other than that received as an office-holder or member; 21 Tax-deductibility of domestic or foreign bribes • shares; Do your country’s tax laws prohibit the deductibility of • directorships; domestic or foreign bribes? • land and buildings above a certain value; • remunerated position as a lobbyist; or Yes. Section 83A of the Taxes Consolidation Act 1997, which deals with • contracts with the Irish state above a certain value. expenditure involving crime, provides that no deduction shall be made in computing the taxable income of a trade for any expenditure which consti- In addition, an office-holder is required to disclose any interests of the office tutes a criminal offence. The section also prohibits an expense deduction holder’s spouse, civil partner, child, or child of a spouse or civil partner, which for any payment made outside the state where the making of a correspond- could materially influence the performance of the office-holder’s function. ing payment in the state would constitute a criminal offence. Furthermore, if the office holder or a person connected to the office-holder has a material interest in the performance of a function of his office, there is a Domestic bribery requirement to furnish a statement of the nature of the interest. 22 Legal framework 26 Travel and entertainment Describe the individual elements of the law prohibiting bribery Describe any restrictions on providing domestic officials of a domestic public official. with gifts, travel expenses, meals or entertainment. Do the Please see question 2. The Public Bodies Act, the Prevention of Corruption restrictions apply to both the providing and receiving of Act, the Theft and Fraud Act and the Ethics Act all apply to the bribing of a such benefits? domestic public official. Irish anti-corruption legislation does not take the type of gift, considera- 23 Prohibitions tion or advantage into account when determining if an offence has been committed but focuses on whether the elements of the particular offence Does the law prohibit both the paying and receiving of a bribe? have been established, including whether the gift has been given corruptly. Yes. See question 2. 27 Gifts and gratuities 24 Public officials Are certain types of gifts and gratuities permissible under your How does your law define a public official and does that domestic bribery laws and, if so, what types? definition include employees of state-owned or state- A gift or gratuity that is not given ‘corruptly’ will fall outside the scope of controlled companies? the Public Bodies Act and Prevention of Corruption Act and will therefore Prevention of Corruption Act be permissible. There is a non-exhaustive list of public officials set out in section 1 of the In respect of disclosure of gifts by public officials, section 15 of the Prevention of Corruption Act. See question 2. Ethics Act provides that gifts to office-holders that exceed €650 are deemed to be a gift given to the Irish state and must be declared by the recipient as soon as possible after receipt. The Guidelines for Office-Holders www.gettingthedealthrough.com 99 IRELAND Matheson
Update and trends Proposed corruption legislation interests, it shall be presumed that this enrichment is the result of On 20 June 2012, the Minister for Justice published the draft scheme corruption. of the much-anticipated Corruption Bill. The draft scheme proposes • Companies will also be liable for corruption offences of their to repeal the numerous pieces of anti-corruption legislation in Ireland employees, agents, subsidiaries, officers, secretaries, managers and and replace them with one consolidated piece of legislation. Many directors, where there is an intention by those persons to obtain of the existing provisions remain in the draft scheme but have been or retain business for the company. This will make it easier for clarified and strengthened. It is not clear when the Corruption Bill will companies to be prosecuted for corruption. be published, although we anticipate that it will be during the first half of • It will be a defence for a company to be able to show that it took 2015. The main features of the draft scheme are as follows: all reasonable steps and exercised all due diligence to avoid the • An expanded definition of ‘corruption’ to include acting in breach commission of the offence. of duty, acting without due impartiality, acting without lawful authority, acting in breach of a relevant code, acting in pursuit of In addition, GRECO published its fourth evaluation report on corruption undue benefit, and acting in a deceitful, dishonest or misleading prevention in Ireland on 21 November 2014. While GRECO praised manner. Should the Bill be published in the proposed terms, the the transparency of the Irish legislative process and the independence scope of the offence of bribery would be expanded far beyond that of the judiciary and prosecution service, it made a number of currently covered by Irish or UK corruption legislation. recommendations to safeguard the independence of such functions. • A new presumption of corruption in respect of corrupt enrichment For example, GRECO recommended reforms of the systems of ethical by an Irish public official. Where an Irish public official maintains standards and conduct of members of Parliament, the system of a standard of living above that commensurate with his stated appointment and promotion of judges, and the structure to receive and handle complaints in relation to the DPP and the Irish police.
require office holders to surrender such gifts. These provisions do not apply forfeit his or her right and claim to any compensation or pension to which to a gift given by a friend, relative or civil partner for personal reasons or he or she would otherwise have been entitled. given pursuant to another office, a capacity or position (other than that of office holder). Prevention of Corruption Act and Theft and Fraud Act The SIPO Commission has also published Guidelines for Public The sanctions are the same as those set out in question 15. Servants that cover a wider range of persons than ‘office-holder’, who would commonly be considered ‘public officials’. These guidelines require 30 Facilitating payments that gifts in excess of €650 be disclosed by the recipient, but do not require Have the domestic bribery laws been enforced with respect to their surrender. facilitating or ‘grease’ payments? 28 Private commercial bribery See question 6. Does your country also prohibit private commercial bribery? 31 Recent decisions and investigations Yes. There is no distinction drawn for the purposes of the commission of Identify and summarise recent landmark decisions and corruption offences in the Prevention of Corruption Act between persons employed by public and private organisations. However, the presumptions investigations involving domestic bribery laws, including any of corruption detailed in question 2 apply only to public officials. investigations or decisions involving foreign companies. There have been no significant reported investigations of corruption 29 Penalties and enforcement offences in Ireland during 2014. To date, a limited amount of domestic What are the sanctions for individuals and companies violating bribery law enforcement has taken place. This has focused on domestic the domestic bribery rules? public bribery of Irish public officials and public employees for corruption. The Group of States against Corruption (GRECO), a body established by the Public Bodies Act Council of Europe, has noted that there were 17 prosecutions directed under On summary conviction for an offence under the Public Bodies Act, an indi- the Prevention of Corruption Act between 2005 and 2008, with imprison- vidual may be liable to a fine not exceeding €2,500 or imprisonment for up to ment imposed in four cases, suspended prison sentences imposed in six 12 months, or both. On indictment an individual may be liable to conviction cases, and fines being imposed in the remainder. In a recent report published or a fine of up to €111,102.08 or imprisonment for up to seven years, or both. in October 2014, Transparency International reported that Ireland was The court can also direct the convicted person to pay to his or her ranked as conducting ‘little or no enforcement’ of the OECD Convention employer the amount or value of any gift, loan, fee or reward received by on Combating Bribery of Foreign Public Officials in International Business him or her. An employee or officer of a public body may also be liable to Transactions.
Bríd Munnelly [email protected] Carina Lawlor [email protected] Michael Byrne [email protected]
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1 International anti-corruption conventions country, or of a body over which the foreign country exercises, directly To which international anti-corruption conventions is your or indirectly, control; and • an employee of a public international organisation, and any person country a signatory? holding a public office or exercising a public function for a public inter- Israel is a signatory to two anti-bribery and anti-corruption conventions: the national organisation; a public international organisation is defined as OECD Convention on Combating Bribery of Foreign Public Officials in an organisation formed by two or more countries, or by organisations International Business Transactions and Related Documents; and the formed by two or more countries. UN Convention against Corruption – UNCAC. Section 291A of the Penal Law defines a foreign country in a broad manner, 2 Foreign and domestic bribery laws including any governmental unit in the foreign country, whether national, regional or local, as well as a non-state entity, such as the Palestinian Identify and describe your national laws and regulations National Authority. prohibiting bribery of foreign public officials (foreign bribery laws) and domestic public officials (domestic bribery laws). 5 Travel and entertainment restrictions The offence of bribery of a foreign official is regulated by section 291A of To what extent do your anti-bribery laws restrict providing the Israeli Penal Law 1977 (the Penal Law). foreign officials with gifts, travel expenses, meals or Bribery of a foreign official is also considered an offence with respect to entertainment? the Prohibition on Money Laundering Law 2000 (the Money Laundering Law), and therefore the bribing party and bribed party may be subject to In respect of the offences relating to bribery, Israeli law does not distin- criminal liability pursuant to the Money Laundering Law in addition to the guish between the kinds of consideration actually given. Such considera- penalties set out in the Penal Law. tion may include money, valuables, services or other benefits. Granting The offence of bribery of a public official is regulated by sections 290– either of these is prohibited when granted in order to obtain, secure or pro- 291 of the Penal Law. mote a business activity or other benefits regarding a business activity, as In addition, section 208 of the Customs Ordinance (New Version) set out above. imposes a penalty on a person who bribes or causes the bribery of a cus- toms official, or offers or promises a customs official such consideration or 6 Facilitating payments conspires with a customs official, all with the intention to induce such -offi Do the laws and regulations permit facilitating or ‘grease’ cial to neglect his or her duties, or a person who tries, by threats, demands payments? or promises to influence such customs official in the performance of the official’s duties. The Penal Law does not allow facilitation payments to the extent such payments fall under the scope of the offence set out in section 291A. Foreign bribery 7 Payments through intermediaries or third parties 3 Legal framework In what circumstances do the laws prohibit payments through Describe the elements of the law prohibiting bribery of a intermediaries or third parties to foreign public officials? foreign public official. Section 293(5) of the Penal Law prohibits payments through intermediar- The offence of bribery of a public official, prescribed in section 291A of the ies or third parties. The Penal Law applies to bribery offences, whether the Penal Law, prohibits offering or paying a bribe to a foreign public official bribe was given by the bribing party or an intermediary, whether given to for the purpose of obtaining, assuring or promoting a business activity or the recipient or another person on behalf of the recipient, whether given obtaining an advantage in relation to a business activity. The bribe may in advance or post factum, and whether the beneficiary or another person also be given for a vicarious promotion of the business activity, for exam- was the recipient. ple by paying a foreign public official for unlawful disclosure of information Moreover, section 295 of the Penal Law provides that the intermediary that may give the bribing party an advantage in obtaining a transaction. is perceived as a bribed party, and may also face penal liability. Illicit payments through intermediaries are also prohibited pursuant to 4 Definition of a foreign public official section 208 of the Customs Ordinance (New Version). How does your law define a foreign public official? Section 29(a) of the Penal Law broadens the definition of a perpetrator to include someone who commits the offence together with the perpetra- According to the Penal Law, a foreign public official includes any of the tor, as well as someone committing the offence by means of using a third following: party. The Penal Law views an offence as jointly committed by multiple co- • an employee of a foreign country and any person holding a public perpetrators, whether such parties have jointly committed the offence in its office or exercising a public function on behalf of a foreign country, entirety, or different parts thereof. All persons involved in the commitment including in the legislative, executive or judicial branch of the foreign of prohibited acts are jointly perceived as perpetrators. country, whether by appointment, election or by agreement; In addition, section 31 of the Penal Law imposes penal liability on • a person holding a public office or exercising a public function on persons who commit an act in order to enable, facilitate or secure the con- behalf of a public body incorporated by an enactment of a foreign summation of an offence, to prevent the apprehension of the perpetrator www.gettingthedealthrough.com 101 ISRAEL Horn & Co Law Offices or discovery of the offence, or in order to contribute in any other way to the Prior to the adoption of the conventions, in July 2008 Israel amended creation of facilitating conditions. the Penal Law to include the offence of bribery of a foreign public official. In light of the above, any person assisting or enabling the act of brib- Prior to such amendment, the existing offence of bribery in the Israeli ery to a foreign public official, or committing any act regarded as part of Penal Law did not apply to foreign public officials but did apply to domes- the offence, may also face penal liability in connection with the offence of tic public servants. In addition, the fines that will be imposed on corpora- bribery to a foreign public official. tions and individuals for the offence of bribery, both domestic bribery and the bribery of foreign officials, have been increased, in an effort to make 8 Individual and corporate liability the offence economically unfeasible. Moreover, Israel has equalised the Can both individuals and companies be held liable for bribery fines for both the bribing and bribed parties, and increased the term of imprisonment. of a foreign official? In addition, in 2009 Israel amended the Income Tax Ordinance to According to the general provisions of the Israeli Penal Law, both individ- include section 32(16), which prohibits the tax deduction of amounts that uals and corporations may be held liable for bribery of a foreign official. are reasonably suspected to be illegal payments. It should be noted that Both the corporation and the employees committing, or principals to, the this has been the policy of the courts and the tax authorities for a while, and offence may face penal liability. therefore some may say that this reform is mainly declarative.
9 Civil and criminal enforcement 14 Prosecution of foreign companies Is there civil and criminal enforcement of your country’s In what circumstances can foreign companies be prosecuted foreign bribery laws? for foreign bribery? Israeli bribery laws are enforced through the criminal justice system. In According to section 7 of the Penal Law, the Penal Law applies to any fel- addition, a public official may be subject to disciplinary procedures at the ony committed within the territory of Israel – an ‘internal felony’ – and an disciplinary tribunal for state employees. Israeli court is therefore competent to rule in prosecutions against foreign Under the Torts Ordinance (New Version), the commission of a crimi- entities and people that have committed internal felonies. nal offence that has caused pecuniary damages to a party may be subject The Penal Law perceives the following as ‘internal felonies’: to civil proceedings against those who have been charged in criminal pro- • an offence committed in whole or in part within the territory of Israel; ceedings, as well as others who have not. Under Israeli law, the elements of and the offence in the criminal procedure must be proven beyond reasonable • any preparatory act for committing an offence, an attempt, an attempt doubt, whereas in the civil procedure the burden of proof is lower. Since the to solicit another, or a conspiracy to commit an offence, committed burden of proof in criminal proceedings is higher than that in civil proceed- outside the territory of Israel, provided that the offence in whole or in ings, it is possible that a bribing party, even if not convicted in a criminal part, was to be committed inside the territory of Israel. procedure, will be held liable in a civil court. Thus, a foreign company may face penal liability when only part of the 10 Agency enforcement offence was committed in Israel and even when only preparatory acts were committed abroad in connection with an offence that was contemplated to What government agencies enforce the foreign bribery laws take place in Israel. and regulations? When the offence is entirely committed outside Israel, the Israeli The police and the State Attorney’s Office are in charge of penal enforce- Penal Law may apply to foreign entities by virtue of section 13(a)(3), as ment, including under foreign bribery laws and regulations. the act of bribery violates the integrity of civil servants and therefore the activity of Israeli state authorities. In addition, the foreign entity may be 11 Leniency liable and prosecuted in Israel for the offence of bribery of a public serv- ant by virtue of section 16 of the Penal Law, which applies the Penal Law Is there a mechanism for companies to disclose violations in to offences committed outside the territory of Israel, provided that Israel exchange for lesser penalties? undertook to prosecute such offences when acceding to international con- Israeli law does not include a statutory mechanism of disclosure in return ventions, such as the aforementioned OECD Convention on Combating for lesser penalties. The criminal justice system does allow plea agree- Bribery of Foreign Public Officials in International Business Transactions ments, as described below. and Related Documents. In addition, there are protective laws that apply to disclosure by Notwithstanding the foregoing, the probability of prosecution of for- individuals. eign entities on account of offences that are not internal felonies is difficult to assess. 12 Dispute resolution 15 Sanctions Can enforcement matters be resolved through plea agreements, settlement agreements, prosecutorial discretion What are the sanctions for individuals and companies violating or similar means without a trial? the foreign bribery rules? The criminal justice system allows the prosecution to enter into plea agree- The maximum penalty for an individual for the offence of bribing a foreign ments with defendants, which often contemplate decreased penalties in public official is a maximum imprisonment term of seven years or a fine, consideration for the defendant’s admission of guilt. Plea agreements and as detailed below. the terms thereof are subject to the approval of the court. The penal jus- Corporations are not subject to imprisonment, but are subject to tice system also allows the prosecution to enter into specific agreements criminal liability in terms of fines. with defendants that grant such individuals the status of a ‘state witness’, The fine would be in the higher amount of the following: which often contemplates benefits for such individuals in consideration for • 1.13 million new Israeli shekels for an individual; incriminating testimony. • 2.26 million new Israeli shekels for a corporation; or • four times the value of the benefit that was obtained or aimed for by 13 Patterns in enforcement committing the offence.
Describe any recent shifts in the patterns of enforcement of the 16 Recent decisions and investigations foreign bribery rules. Identify and summarise recent landmark decisions or In recent years, Israel has been striving towards strong enforcement of investigations involving foreign bribery. bribery offences, and foreign bribery offences in particular. In 2009, Israel joined the UN Convention against Corruption and the OECD Convention As the offence of bribery of a foreign official was included in the Penal Law on Combating Bribery of Foreign Public Officials in International Business only recently, as described above, it is still early to determine shifts in pat- Transactions. terns of enforcement with respect to foreign bribery. Notwithstanding the foregoing, recent years have been characterised with a growing awareness
102 Getting the Deal Through – Anti-Corruption Regulation 2015 Horn & Co Law Offices ISRAEL of political and public corruption. As part of the increasing awareness 18 Disclosure of violations or irregularities to this subject and activities taken by governmental agencies further to To what extent must companies disclose violations of anti- Israel’s adoption of the international anti-corruption conventions, the bribery laws or associated accounting irregularities? Israeli Ministry of Defence has implemented a commitment to avoid foreign bribery by applicants for defence marketing and export licence Companies that are subject to disclosure requirements under the Securities approvals. Exporters were required to adopt and implement corporate anti- Law and the regulations promulgated pursuant thereto are required to bribery compliance programmes as a precondition for receiving marketing disclose to the public any event that occurs out of the ordinary course of and export licences. business and that may have a material influence on the company, and of any event that may influence the price of the company’s shares. A viola- Financial record keeping tion of anti-bribery laws or associated accounting irregularities may well be deemed as an event that requires public disclosure. To the extent that 17 Laws and regulations accounting irregularities result in an amendment or restatement of finan- What legal rules require accurate corporate books and records, cial statements that have been disclosed to the public, such amended state- effective internal company controls, periodic financial ments should be disclosed as well. statements or external auditing? As far as disclosure to law enforcement authorities is concerned, the Penal Law does not impose a legal obligation to file a formal complaint According to the Israeli Companies Law 1999 (the Companies Law), Israeli with respect to bribery offences that have been performed. The Penal Law private companies are required to maintain accounts and to prepare finan- does provide for a maximum punishment of three years’ imprisonment cial statements. The Companies Law provides that Israeli public compa- for senior officers in public companies and certain private companies who nies, and certain private companies that are subject to reporting duties fail to inform a supervisor with respect to an event, which came to such under the Israeli Securities Law 1968 (the Securities Law) are required officers’ knowledge in their capacity as officers of the company, with the to maintain accounts and to prepare financial statements in accordance intention to mislead and knowing that it may harm the company’s abil- with the provisions of the Securities Law. The Securities Regulations ity to comply with liabilities. According to the Tax Ordinance, officers of (Immediate and Periodical Reports) 1970 (the Reporting Regulations) the Tax Authority are prohibited from disclosing information and docu- provide that public companies are required to publish periodical reports, ments regarding a person’s income without the approval of the minister including quarterly financial statements, within two months from the end of finance. Accordingly, the Minister of Finance has authorised the head of the quarter but not later than three days from the financial statements’ of the Israel Tax Authority to approve the disclosure of such information. review date. The Reporting Regulations further provide that public compa- Within such authority, the head of the Israel Tax Authority may disclose to nies are required to publish annual reports, including audited annual finan- the Israeli police information with respect to payments that are suspected cial statements, within three months from the end of the year, but not later to be bribery payments. than 14 days prior to the date of the general meeting at which the audited The Penal Law further includes provisions with respect to accom- financial statements are discussed or three days from the financial state- plices and the obligation to use reasonable efforts to prevent a person from ments’ audit date, whichever is earlier. Companies are further obligated committing a crime. Such provisions relate to offences that have not been to maintain corporate records with respect to the ownership of shares and completed, hence in the event that a company discovers such offences in board membership, as well as the minutes of board and shareholders’ the making, it may face penal liability to the extent it does not use its best resolutions. The Companies Law further provides for a public company’s efforts to prevent the completion of the offence, including approaching the obligation to appoint an Audit Committee, which is expected to discover relevant law enforcement authorities. In addition, the Penal Law prohib- deficiencies in the business management of the company, and the approval its actions that constitute an obstruction of justice, hence assistance to the of this committee is required for the consummation of certain transac- offender following the performance of the offence may also result in penal tions set out in the Companies Law. A public company is further required liability. to appoint an internal auditor, an external service provider who must An officer of a company who becomes aware of such violation of anti- meet certain qualifications and performs an internal audit of the com- bribery laws or associated accounting irregularities, and chooses not to dis- pany in accordance with a detailed periodical work plan. The Reporting close such deficiencies, may be subject to future claims that such behaviour Regulations apply to public companies and have adopted the recommen- constituted a breach of his or her fiduciary duties. The Israeli Ministry of dations of a committee appointed by the Israel Securities Authority to Justice recently emphasised the importance of the exposure of corruption, address corporate governance issues for publicly traded companies. The and the right of employees who exposed such acts to benefit from protec- purpose of the Reporting Regulations is to improve the quality of financial tive measurements set out in applicable legislation. Any violation of anti- reporting and disclosure of companies that are subject to the disclosure bribery laws or associated accounting irregularities that result in changes obligations under the Securities Law and the regulations promulgated to reports and statements provided to the tax authorities must of course be pursuant thereto. Such purpose is achieved through the improvement of disclosed to such authorities to the extent required in order to secure the the infrastructure of internal supervision of financial reporting and disclo- due reporting and payment of taxes by the company. sure in the company, and the enhancement of management’s commitment to pursue such a goal. Public companies and their financial and business 19 Prosecution under financial record keeping legislation disclosures are supervised by the Israel Securities Authority. The Companies Law further requires that companies (except for cer- Are such laws used to prosecute domestic or foreign bribery? tain companies that qualify as ‘non-active’ companies) must appoint an Domestic and foreign bribery offences are prosecuted under the Penal external auditor to perform the audit of its financial statements. In addi- Law as described above and below. Bribery offences often involve money- tion, the Israeli Income Tax Ordinance 1961 (the Tax Ordinance) and the laundering offences and may be subject to penal liability pursuant to such rules and regulations promulgated thereunder provide for companies’ legislation as well. obligations to maintain books and accounts and stipulate the required forms and procedures applicable thereto. The Israeli Tax Authority has 20 Sanctions for accounting violations issued a memorandum with respect to the prohibition on foreign bribery. What are the sanctions for violations of the accounting rules The memorandum includes general instructions for organisations in con- associated with the payment of bribes? nection with the exposure of bribery payments, in accordance with the OECD’s instructions on this matter. The above framework applies in gen- The Penal Law includes various corporate and fraud offences that may eral to most Israeli companies, however companies that are subject to spe- result in fines or maximum incarceration periods of one to five years. Such cific laws and regulations may be further subject to additional provisions offences include the fraudulent receipt of goods, forgery, false registration set out in such laws and regulations, hence an additional specific review in corporate records, harmful actions by employees and officers, with- should be performed with respect to each company. holding of material information by officers, and fraud and breach of duty of loyalty. To the extent such violations result in breaches of tax laws and regulations, offenders may face penal liability pursuant thereto.
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Israeli courts in accordance with general principles developed throughout Update and trends the years, on a case-by-case basis. Given that Israeli courts previously deter- mined, for example, that a bank may be regarded as a corporation provid- The main development in Israel’s anti corruption laws and their ing a public service, it is evident that under certain circumstances a person enforcement was the adoption of the UN Convention against Corruption and the OECD Convention on Combating Bribery of receiving a bribe may be regarded as a ‘public servant’ even if employed by Foreign Public Officials in International Business Transaction and a non-governmental private entity, and that such circumstances should be Related Documents, which were preceded by the amendment of the reviewed on a case-by-case basis in accordance with the principles set out Penal Law to include the offence of bribery of a foreign public official in relevant case law. in consistency with such conventions. A greater emphasis is now given to the eradication of bribery, including the bribery of foreign 25 Public official participation in commercial activities public officials, in accordance with Israel’s perception that bribery and corruption acts pose a threat to democratic institutions and can Can a public official participate in commercial activities while damage the rule of law, inhibiting domestic and global economic serving as a public official? development. In recent years, Israel has been striving towards strong enforcement of bribery offences, including with respect to bribery in The Israeli public officials are subject to the Civil Service Rules (the Rules), international business transactions. which prohibit any private work unless permission is granted. According to In addition, the Israeli State Comptroller has been very active the Rules, a public official may not participate in any commercial activity, in the fight against corruption, as part of the notion that the State whether paid or unpaid, and may not engage in any manner of business Comptroller is a central factor in increasing the accountability and of any kind if there might be a conflict of interest with his or her role or transparency of the public administration. In recent years, Israeli service, or if it may appear to be so. legislation has focused on providing incentives to employees who may expose bribery offences. In 2014 the Protection of 26 Travel and entertainment Employees (Exposure of Offences and Breaches of Integrity or Proper Administration) Law – 1997 was amended to provide greater Describe any restrictions on providing domestic officials protection to employees who filed, or assist in filing complaints with gifts, travel expenses, meals or entertainment. Do the related to exposure of bribery offences. Similar protection is restrictions apply to both the providing and receiving of provided to employees in the public sector under the State such benefits? Comptroller Law – 1958. In general, incumbent government officials and any other employee of a governmental body (including soldiers) may not accept gifts or hospital- 21 Tax-deductibility of domestic or foreign bribes ity without receiving prior approval in accordance with applicable law. However, pursuant to section 2(b)(1) of the Public Service Law (Gifts), Do your country’s tax laws prohibit the deductibility of a public servant may receive a reasonable gift of modest value provided domestic or foreign bribes? it was given in accordance with the applicable custom under the circum- Domestic and foreign bribes may not be recognised as a deductible stances. Pursuant to Governmental Service Regulations, the value of a ‘gift expense. of modest value’ should not exceed 300 new Israeli shekels and should not be paid in cash. Furthermore, Israeli law provides that any gift that is given Domestic bribery to a government official in connection with his or her service is the prop- erty of the state of Israel, whether such gift is given directly to the official 22 Legal framework or to his or her domestic partner or children, in Israel or outside of Israel. Describe the individual elements of the law prohibiting bribery Violation of this law by an official may result in criminal prosecution of that official, a fine and certain other disciplinary measures. As the Penal Law of a domestic public official. provides that bribes may be given in the form of money, valuables, a ser- The bribery offence set out in sections 290 and 291 of the Penal Law vice, or any other benefit, such benefits to public officials may fall under the prohibits the bribery of a public servant who takes a bribe for an act con- definition of bribe and result in penal liability. nected with his functions. A person who gives a bribe shall be treated in like manner as the person who takes it, subject only to a reduced maxi- 27 Gifts and gratuities mum imprisonment penalty. The bribe may be given in the form of money, Are certain types of gifts and gratuities permissible under your valuables, a service, any granting, warranty or discount, the right to receive domestic bribery laws and, if so, what types? a certain benefit, or any other benefit. In addition, section 208 of the Customs Ordinance (New Version) includes specific provisions relating to As described above, the Public Service Law (Gifts) and its regulations per- the bribery of customs officials. mit a public official to accept gifts that are reasonable and of minimal value (not exceeding 300 new Israeli shekels), and were granted in a customary 23 Prohibitions manner considering the circumstances. Does the law prohibit both the paying and receiving of a bribe? For gifts that are not in the manner described above, the public official must request permission as described above. Yes. 28 Private commercial bribery 24 Public officials Does your country also prohibit private commercial bribery? How does your law define a public official and does that As described above, the Penal Law specifically expands the ‘public servant’ definition include employees of state-owned or state- definition for the purpose of the bribery offence, to include an employee controlled companies? of a corporation performing a public service. The Penal Law does not pro- For the purpose of bribery offences, the term ‘public servant’ is generally vide for a definition of ‘a corporation performing a public service’. The defined in section 34(24) of the Penal Law, which includes general defini- term ‘public servant’ has been interpreted by Israeli courts in accordance tions applicable throughout the Penal Law. The definition under section with general principles developed throughout the years, on a case-by-case 34(24) is comprised of a list of specific positions of a traditionally public basis. Given that Israeli courts previously determined, for example, that nature. However, section 290(b) specifically expands the public servant a bank may be regarded as a corporation providing a public service, it is definition for the purpose of the bribery offence to include an employee of a evident that under certain circumstances a person receiving a bribe may corporation performing a public service. It should be noted that, according be regarded as a ‘public servant’ even if employed by a non-governmental to section 293(6) of the Penal Law, the formal nature of the public servant’s private entity, and that such circumstances should be reviewed on a case- engagement is of no relevance, hence the public servant does not necessar- by-case basis in accordance with the principles set out in relevant case law. ily have to be engaged through a formal employer–employee relationship. In 2009, the Israeli Supreme Court ruled that an employee of a private The Penal Law does not provide for a definition of ‘a corporation perform- security company providing services to a Ministry of Interior bureau is con- ing a public service’, and the term ‘public servant’ has been interpreted by sidered a ‘public official’ with respect to the offence of bribery.
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29 Penalties and enforcement 31 Recent decisions and investigations What are the sanctions for individuals and companies violating Identify and summarise recent landmark decisions and the domestic bribery rules? investigations involving domestic bribery laws, including any investigations or decisions involving foreign companies. The maximum penalty for a public official who accepts a bribe is an impris- onment term of 10 years or a fine, as detailed below. There have been several recent significant investigations by the Israeli The maximum penalty for an individual who bribes a public official is authorities dealing, among other things, with the felony of bribery. The an imprisonment term of seven years or a fine, as detailed below. most significant court ruling in the area of domestic bribery laws during Corporations are not subject to imprisonment, but are subject to 2014 was the conviction of former Prime Minister, Mr Ehud Olmert, in the criminal liability in terms of fines. Holyland corruption case, in which the Tel Aviv District Court convicted The fine would be in the higher amount of the following: Mr Olmert of accepting bribes when he served as mayor of Jerusalem, in • 1.13 million new Israeli shekels for an individual; exchange for helping the developers of the Holyland Park residential pro- • 2.26 million new Israeli shekels for a corporation; or ject in the city. Mr Olmert was sentenced to six years in prison for his con- • four times the value of the benefit that was obtained or was aimed for viction on two counts of bribery. Additional senior officials and real estate by committing the offence. entrepreneurs were convicted in this high-profile bribery case. Mr Olmert and several others who were convicted in the Holyland affair have recently 30 Facilitating payments began their Supreme Court appeals against such convictions. Another high Have the domestic bribery laws been enforced with respect to profile case involving former Prime Minister Olmert, is a case involving the facilitating or ‘grease’ payments? alleged receipt by Mr Olmert of donations from New York businessman Morris Talansky, that were not properly reported. Mr Olmert was acquit- The Penal Law does not allow facilitating payments to the extent such ted in 2012 from charges of fraud, breach of trust and concealing fraudu- payments fall under the scope of the offence set out in sections 290 or 291 lent earnings in this affair. However, the Supreme Court recently ordered a of such law. retrial due to new testimony from Mr Olmert’s former assistant, Ms Shula Zaken, including recordings of conversations between Mr Olmert and Ms Zaken, who provided the information as part of a plea bargain.
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1 International anti-corruption conventions things of value, or accepts a promise of such things (article 319 ICC); To which international anti-corruption conventions is your • ‘bribery for the performance of the function’, which occurs when the public official, in connection with the performance of his or her func- country a signatory? tions or powers, unduly receives, for his or her benefit or for that of Italy is a signatory to the following European and international conven- a third party, money or other things of value, or accepts the promise tions related to anti-corruption. of them (article 318 ICC). It should be noted that Law No. 190/2012 has significantly extended the reach of this offence, which now relates European Union to the receipt of money or other items of value by the public official, The Convention on the Fight against Corruption Involving Officials of the either in exchange for the carrying out of a specific act not conflicting European Community or Officials of the Member States of the European with his or her public official duties (as it was also in the previous ver- Union, Brussels, 26 May 1997 (ratified by Law No. 300/2000, entered into sion), or for generally placing the public office at the disposal of the force on 26 October 2000). briber, even in the absence of a specific public act being exchanged with the briber; Council of Europe • ‘bribery in judicial acts’, which occurs when the conduct mentioned The Criminal Law Convention on Corruption, Strasbourg, 27 January 1999 under the first two points above is taken for favouring or damaging a (ratified by Law No. 110/2012, entered into force on 27 July 2012). party in a civil, criminal or administrative proceeding (article 319-ter The Civil Law Convention on Corruption, Strasbourg, 4 November ICC); 1999 (ratified by Law No. 112/2012, entered into force on 28 July 2012). • the new offence of ‘unlawful inducement to give or promise anything of value’ introduced by Law No. 190/2012, which punishes both the International public official and the private briber, where the public official, by -abus The OECD Convention on Combating Bribery of Foreign Public Officials ing of his or her quality or powers, induces someone to unlawfully give in International Business Transactions, Paris, 17 December 1997 (ratified or promise to him or her or to a third party money or anything of value by Law No. 300/2000, entered into force on 26 October 2000). (article 319-quater ICC). It should be noted that, under the previous The UN Convention against Transnational Organized Crime, New regime, only the public official was responsible for the aforementioned York, 15 November 2000 (ratified by Law No. 146/2006, entered into force conduct in relation to the differing offence of ‘extortion committed by on 12 April 2006). a public official’ (article 317 ICC), while the private party was consid- The UN Convention against Corruption, New York, 31 October 2003 ered the victim of the crime. In the new system, the offence of ‘extor- (ratified by Law No. 116/2009, entered into force on 15 August 2009). tion committed by a public official’ (article 317 ICC) only applies to Furthermore, Italy has started the process of ratification of the EU residual cases where the private party is ‘forced’ by the public official Framework Decision 2003/568/JHA of 22 July 2003, on Combating to give or promise a bribe; in relation to such cases, the private party Corruption in the Private Sector. is still considered the victim of the crime, and the offence entails the exclusive criminal liability of the public official; and 2 Foreign and domestic bribery laws • the new offence of ‘trafficking of unlawful influence’, introduced by Law No. 190/2012, which punishes anyone not involved in cases of Identify and describe your national laws and regulations ‘proper bribery’ and ‘bribery in judicial acts’ who, by exploiting exist- prohibiting bribery of foreign public officials (foreign bribery ing relations with a public official, unduly makes someone giving or laws) and domestic public officials (domestic bribery laws). promising him or her or others money or other patrimonial advantage as the price for his or her unlawful intermediation with the public Both domestic and foreign bribery are prohibited as criminal offences official, or as consideration for carrying out an act conflicting with the under the Italian Criminal Code of 1930 (the ICC). On 28 November 2012, office’s duties, or for the omission or delay of an office’s act. Criminal by Law No. 190/2012, a significant reform of the Italian anti-corruption responsibility also equally applies to the private party who unduly system entered into force, introducing, inter alia, new bribery offences, gives or promises money or other patrimonial advantage (article increasing the punishments for existing offences and, more generally, 346‑bis ICC). extending the sphere of responsibility for private parties involved in bribery. These bribery offences apply not only in relation to ‘public officials’ but also, with some exceptions, to ‘persons in charge of a public service’ (arti- Domestic bribery laws cle 320 ICC; for the distinction between the two categories, see ques- The bribery offences relating to domestic public officials are provided for tion 4). If the private party makes an undue offer or promise that is not by articles 318 to 322 ICC, and by the new article 346-bis ICC; their sanc- accepted by the public official, or if the public official solicits an undue tions, with some exceptions, generally apply either to the public official or promise or payment that is not carried out by the private party, the less to the private briber (article 321 ICC). In particular, the ICC provides for the serious offence of ‘instigation to bribery’ occurs (article 322 ICC). following forms of domestic bribery, the essence of which is the unlawful agreement between the public official and the briber: • ‘proper bribery’, which occurs when the public official, in exchange for Foreign bribery laws The bribery offences relating to foreign public officials are provided for by performing (or having performed) an act conflicting with the duties article 322-bis ICC, introduced by Law No. 300/2000, which implemented of his or her office, or in exchange for omitting or delaying (or having into the Italian legal system both the EU Anti-Corruption Convention omitted or delayed) an act of his or her office, receives money or other
106 Getting the Deal Through – Anti-Corruption Regulation 2015 Studio Legale Pisano ITALY of Brussels of 1997 (on European Officials), and the OECD Anti-Bribery Mental element Convention of Paris of 1997 (on Foreign Officials). Therefore, as of 2000, The mental element required for bribery offences is always intent (includ- the scope of bribery offences has been significantly extended, in such a ing, for the private briber, knowledge and will to carry out an undue pay- way to include bribery of public officials of the EU institutions and of the ment to a public official). EU member states and, under certain conditions, also of public officials of foreign states and of international organisations (such as the UN, OECD, 4 Definition of a foreign public official European Council, etc). How does your law define a foreign public official?
Foreign bribery Officials of EU institutions With respect to the officials of the EU institutions, Italian law provides 3 Legal framework for an express listing of the relevant categories (including members of Describe the elements of the law prohibiting bribery of a the European Commission, Parliament, Court of Justice, and officials of foreign public official. related institutions; article 322-bis, paragraph 1, ICC). Officials of EU and foreign states, and of international organisations EU officials As far as the officials of EU states, foreign states and international As far as bribery relating to public officials of the EU institutions and of organisations are concerned, Italian law makes express reference to the EU member states is concerned, article 322-bis (paragraphs 1 and 2) ICC persons who, within these states and organisations, ‘perform functions or extends to such public officials, and to the private briber, the same bribery activities equivalent to the ones of public officials and of persons in charge offences originally provided for domestic public officials (see question 2), of a public service’ (article 322-bis, paragraphs 1 and 2, ICC). In other words, and in particular: Italian criminal law extends to them the same definitions already provided • ‘proper bribery’, which occurs when the public official, in exchange for for domestic officials, according to which: performing (or having performed) an act conflicting with the duties • ‘public officials’ are such persons ‘who perform a public function, of his or her office, or in exchange for omitting or delaying (or having either legislative or judicial or administrative’ (for the same criminal omitted or delayed) an act of his or her office, receives money or other law purposes, ‘an administrative function is public if regulated by the things of value, or accepts a promise of such things (article 319 ICC); rules of public law and by acts of a public authority and characterised • ‘bribery for the performance of the function’, which occurs when the by the forming and manifestation of the public administration’s will public official, in connection with the performance of his or her func- or by a procedure involving authority’s powers or powers to certify’; tions or powers, unduly receives for him or her, or for a third party, article 357, paragraphs 1 and 2, ICC); and money or other items of value or accepts the promise of them (article • ‘persons in charge of a public service’ are ‘those who, under any title, 318 ICC); perform a public service’ (for the same criminal law purposes, ‘a public • ‘bribery in judicial acts’, which occurs when the conduct mentioned service should be considered an activity governed by the same forms under the first two points above is taken for favouring or damaging a as the public function, but characterised by the lack of its typical pow- party in a civil, criminal or administrative proceeding (article 319-ter ers, and with the exclusion of the carrying out of simple ordinary tasks ICC); and merely material work’; article 358, paragraphs 1 and 2, ICC). • ‘unlawful inducement to give or promise anything of value’, which occurs when the public official, by abusing of his or her quality or pow- In accordance with the above definitions, ‘public officials’ includes judges ers, induces someone to unlawfully give or promise to him or her or to and their consultants, witnesses (from the moment the judge authorises a third party money or anything of value (article 319-quater ICC); and their summons), notaries public, police officers, etc. On the contrary, ‘per- • ‘instigation to bribery’, which occurs when the private party makes an sons in charge of a public service’ includes state or public administration undue offer or promise that is not accepted by the public official, or employees lacking the typical powers of a public authority (ie, electricity when the public official solicits an undue promise or payment that is and gas men, etc). not carried out by the private party (article 322 ICC). Employees of state-owned or state-controlled companies are not expressly included within the legal definition, but they implicitly fall within Foreign and international officials the relevant ‘public’ categories on condition that the activity effectively With respect to bribery relating to public officials of foreign states and of carried out is governed by public law or has a public nature. international organisations (such as the UN, OECD, European Council, etc), article 322-bis (paragraph 2) ICC extends to these situations the appli- 5 Travel and entertainment restrictions cation of the mentioned domestic bribery offences, but with the following two significant limitations: To what extent do your anti-bribery laws restrict providing • only active corruption is punished (namely, only the private briber, foreign officials with gifts, travel expenses, meals or on the assumption that the foreign public officials will be punished entertainment? according to the laws of the relevant jurisdiction); and Italian criminal law provisions do not expressly restrict the giving of gifts, • on the condition that the act is committed to obtain an undue advan- travel expenses, meals or entertainment either to domestic or foreign offi- tage in international economic transactions or with the purpose of cials. However, all these advantages could represent the ‘undue considera- obtaining or maintaining an economic or financial activity (the con- tion’ for a public official prohibited by Italian law (falling within the concept duct prohibited by the last part of this limitation was recently added of ‘other things of value’ provided for in relation to bribery offences). In by Law No. 116/2009, which has implemented the UN Convention particular, with respect to the offence of ‘bribery for the performance of against Corruption of 2003). the function’ (which also includes the carrying out by the public official of an act not conflicting with the duties of the office; see questions 2 and Jurisdiction 3), the past consolidated case law excluded tout court criminal relevance As of 2000, pursuant to article 322-bis ICC, the reach of bribery offences with respect to gifts of objective ‘small value’, and that could be considered has been significantly broadened, because it is now immaterial if the func- ‘commercial courtesy’ in the concrete case. On the contrary, in relation tions of the official who receives or is offered a consideration have no -con to ‘proper bribery’ (ie, to perform an act conflicting with the duties of the nection to Italy. However, in relation to the mentioned offences, Italy has office), the very strict interpretation of the case law is that the ‘small value’ not established a general ‘extra-territorial’ jurisdiction. In fact, the govern- of the gift never excludes, as such, the criminal responsibility. The crucial ing principle on the point has remained the territoriality one, according to criterion for affirming or excluding criminal liability is therefore the rela- which Italian courts have jurisdiction only on bribery offences which are tion of do ut des between the gift (or other advantage) and the ‘act’ of the considered committed within the Italian territory: namely, when at least a public official (ie, to what extent the gift represents a consideration for the segment of the prohibited conduct (ie, the decision to pay a bribe abroad), carrying out of the mentioned ‘act’). or its event, take place in Italy. This principle suffers a derogation in favour Furthermore, it should be noted that some Italian non-criminal regu- of the ‘extraterritorial’ jurisdiction only to a very limited extent, and under lations restrict providing Italian officials with gifts, etc. As of 1 January stringent requirements (presence in Italy of the suspect, request of the 2008, Italian government members and their relatives are prohibited from Italian Minister of Justice, unsuccessful extradition proceedings, etc; see keeping in their personal possession ‘entertainment gifts’, received in articles 9 to 10 ICC). www.gettingthedealthrough.com 107 ITALY Studio Legale Pisano official occasions, of a value higher than €300 (Prime Ministerial Decree 10 Agency enforcement of 20 December 2007). Along the same lines, employees of the Italian pub- What government agencies enforce the foreign bribery laws lic administration are prohibited from accepting gifts from persons who and regulations? could benefit from their decisions, with the exception of gifts of courtesy of small value (Decree of 28 November 2000), and the same prohibition is Bribery laws are enforced by public prosecutors, who in the Italian legal generally contained in the ethical codes implemented by the various state- system are not a government agency but magistrates who, as judges, are owned or state-controlled companies. independent from the executive power. According to Law No. 190/2012, the Italian government issued a new In 2004 a new body called the Anti-Corruption High Commission code of conduct for employees in public administration, which entered was set up, provided with rather limited powers such as making inquiries into force on 19 June 2013, specifically aimed at preventing corruption and on the causes of corruption, and making studies on the adequacy of the at ensuring compliance with the public officials’ duties of impartiality and Italian system to fight against corruption. In 2008, the functions of the high exclusive devotion to the public interest. Pursuant to this code of conduct, commission were transferred to the Anti-Corruption and Transparency the limit on the permissible value of ‘gifts of courtesy of small value’ is Service, an internal body within the Ministry for the Public Function. equivalent to a maximum of €150. Law Decree No. 90 of 24 June 2014, has attributed significant new powers to the National Anti-Corruption Authority (ANAC), in an effort 6 Facilitating payments to counteract bribery conduct by providing effective coordination and Do the laws and regulations permit facilitating or ‘grease’ exchange of information between that body and the various Prosecutor’s Offices investigating cases of corruption, as well as providing the ANAC payments? with effective powers of supervision over relevant public tenders. No, they are prohibited by Italian law. 11 Leniency 7 Payments through intermediaries or third parties Is there a mechanism for companies to disclose violations in In what circumstances do the laws prohibit payments through exchange for lesser penalties? intermediaries or third parties to foreign public officials? There is no formal mechanism as such. However, a certain degree of coop- Payments amounting to bribery offences (described in questions 2 and 3) eration with the prosecuting authorities before trial (in terms of removal of are prohibited whether they are carried out directly or indirectly, through the officers or members of the body allegedly responsible for the unlawful intermediaries or third parties. In the event of payments made through conduct, implementation of compliance programmes aimed at preventing intermediaries, Italian prosecutors should prove, and Italian courts should the same type of offences, compensation for damage, etc) can have a sig- assess, that the payment to the intermediary was made with the knowledge nificant impact in reducing the pretrial and final sanctions to be applied to and intent to subsequently bribing the foreign public official. the corporation.
8 Individual and corporate liability 12 Dispute resolution Can both individuals and companies be held liable for bribery Can enforcement matters be resolved through plea of a foreign official? agreements, settlement agreements, prosecutorial discretion or similar means without a trial? Yes, both individuals and companies can be held liable for bribery of a foreign official. With respect to the responsibility of individuals, see ques- According to Italian law, criminal action is compulsory and not discre- tion 3. As far as the responsibility of corporations is concerned, as of 2001 tional, and it cannot be dropped by the public prosecutor (unless he or she prosecutions can be brought against them (both Italian and foreign cor- assesses that no crime was ever committed, and then requests accordingly porations) also for bribery offences (article 25 of Legislative Decree No. a dismissal from the competent judge). 231/2001). In order for a corporation to be held responsible, it is necessary Under certain conditions, plea bargaining with prosecuting authorities that a bribery offence is committed in the interest or for the benefit of the is recognised by Italian law. It has to be approved by the competent judge, corporation by its managers or employees. The corporation’s responsibility the punishment agreed upon cannot be more than five years’ imprison- is qualified as an administrative offence, but the matter is dealt with by a ment, and it is substantially considered as a conviction sentence (article criminal court in accordance with the rules of criminal procedure, in pro- 444 of the Italian Code of Criminal Procedure). ceedings that are usually joined with the criminal proceedings against the Furthermore, under certain conditions, a civil settlement with the per- corporations’ officers or employees. son injured, aimed at compensating damage, can qualify as a ‘mitigating Where the bribery offence is committed by an ‘employee’, the corpora- circumstance’ to reduce the criminal sentence. tion can avoid liability by proving that it had implemented effective ‘com- pliance programmes’ designed to prevent the commission of that type of 13 Patterns in enforcement offence (article 7 of Legislative Decree No. 231/2001). Where the bribery Describe any recent shifts in the patterns of enforcement of the offence is committed by ‘senior managers’, the implementation of effective foreign bribery rules. ‘compliance programmes’ does not suffice, and the responsibility is avoida- ble only by proving that the perpetrator acted in ‘fraudulent breach’ of cor- The most significant shift is the one reported in questions 2 and 3, concern- porate compliance controls (article 6 of Legislative Decree No. 231/2001). ing the implementation into the Italian legal system, by Law No. 300/2000 (article 322-bis ICC), of both the EU Anti-Corruption Convention of 9 Civil and criminal enforcement Brussels of 1997 and the OECD Anti-Bribery Convention of Paris of 1997. Is there civil and criminal enforcement of your country’s As explained, since then the scope of bribery offences has been signifi- foreign bribery laws? cantly extended. Another relevant development is the one reported in question 8, con- Yes. Criminal enforcement in particular has significantly increased in sisting of the extension to Italian and foreign corporations, as of 2001, of recent years; on this point, see questions 13 to 16. As far as civil enforce- the responsibility for bribery offences relating to domestic and foreign ment is concerned, as explained in question 1, Italy has recently ratified officials (article 25 of Legislative Decree No. 231/2001). the Council of Europe Civil Law Convention on Corruption of 4 November Finally, the latest recent developments are the implementation, by 1999, which entered into force in the Italian system on 28 July 2012. Law No. 116/2009, of the 2003 UN Convention against Corruption, with Therefore, the current Italian legislation on this point (especially on the the consequent broadening of the reach of foreign bribery offences (see aspects of civil liability and compensation of damage deriving from cor- question 3); and the ratification in June 2012 of both the Council of Europe ruption) can be considered to be in full compliance with international Civil and Criminal Conventions on Corruption of 1999 (see question 1). standards.
108 Getting the Deal Through – Anti-Corruption Regulation 2015 Studio Legale Pisano ITALY
14 Prosecution of foreign companies 16 Recent decisions and investigations In what circumstances can foreign companies be prosecuted Identify and summarise recent landmark decisions or for foreign bribery? investigations involving foreign bribery. As reported in question 3, although since 2000 the scope of bribery offences In relation to foreign bribery offences, only a few investigations and pros- has been extended in order to include the bribery of foreign officials, Italy ecutions have been conducted by Italian authorities, the most significant has not established in that respect a general ‘extraterritorial’ jurisdiction. of which are the following. The governing principle on the point has remained the territoriality one, according to which Italian courts have jurisdiction only on bribery offences The Oil-for-Food programme that are considered to have been committed within the Italian territory, With respect to the mismanagement of the Oil-for-Food programme, on namely, when at least a segment of the prohibited conduct (ie, the decision 10 March 2009 the Milan court of first instance sentenced to two years’ to pay a bribe abroad), or its event, take place in Italy. This principle suf- imprisonment three Italian individuals acting, directly or indirectly, for an fers a derogation in favour of the ‘extraterritorial’ jurisdiction only to a very Italian oil company, for the charge of foreign bribery, under the assump- limited extent, and under stringent requirements (presence in Italy of the tion that they paid bribes to a state-owned Iraqi company. On 15 April 2010 suspect, request of the Italian Minister of Justice, unsuccessful extradition the Milan Court of Appeal acquitted all co-defendants owing to the charges proceedings, etc; see articles 9 to 10 ICC). being time-barred. In accordance with the mentioned territoriality principle, therefore, foreign corporations can be prosecuted in Italy for foreign bribery on con- ENI-Nigeria dition that at least a segment of the prohibited conduct takes place in Italy; The ENI-Nigeria case concerns an investigation conducted by the Milan and, in addition, that all other requirements for the corporation’s respon- Prosecutor’s Office against the companies ENI SpA and Saipem SpA sibility are fulfilled. In essence, as reported in question 8, the bribery in relation to the offence of foreign bribery allegedly committed by the offence must have been committed in the interest or for the benefit of the companies’ officers (in the frame of the international consortium Tskj, corporation by its managers or employees, and that effective ‘compliance involving the US company KBR-Halliburton, the Japanese Igc and the programmes’ were not implemented at the time of the offence. French Technip), and allegedly consisting of significant payments to With respect to the very limited extent of the Italian ‘extra-territorial’ Nigerian public officials in the period 1994 to 2004 in order to win gas jurisdiction concerning corporations, Italian law provides that it does apply supply contracts. On 17 November 2009 the Milan judge for the prelimi- only to corporations having their main seat in Italy, and on condition that nary investigations rejected the prosecutors’ application for applying to the bribery offence is not prosecuted by the state where it was committed ENI SpA and Saipem SpA the pretrial ‘interim measure’ of prohibition to (article 4 of Legislative Decree No. 231/2001). enter into contracts with the Nigerian National Petroleum Corporation, owing to lack of Italian jurisdiction. The case against ENI SpA was sub- 15 Sanctions sequently dismissed, and on 5 April 2012, the case against five officers of What are the sanctions for individuals and companies violating Saipem SpA was also dismissed because of the time bar; however, with the foreign bribery rules? respect to the case against the Saipem SpA corporation, in July 2013 Saipem was sentenced by the Milan court of first instance to a fine of €600,000 and With respect to individuals, sentences for bribery offences (domestic and confiscation of €24.5 million, pursuant to Legislative Decree No. 231/2001. foreign ones) vary depending on the nature of the offence. In particular: • for ‘proper bribery’ (act conflicting with the duties of the office), pun- Finmeccanica–AgustaWestland ishment is imprisonment of four to eight years, and it can be increased The Finmeccanica–AgustaWestland case concerns a prosecution conducted owing to ‘aggravating circumstances’; by the Prosecutor’s Office of Busto Arsizio (an area close to Milan) against • for ‘bribery for the performance of the function’, punishment is impris- the companies Finmeccanica and AgustaWestland and their top managers onment of one to five years, and it can be increased due to ‘aggravating in relation to the offence of foreign bribery allegedly committed in 2010 circumstances’; in connection with the supply to the Indian government of 12 helicopters. • for ‘bribery in judicial acts’, punishment is imprisonment of four to 10 In 2014, firstly the prosecutors discontinued the investigations against years, and it can be increased due to ‘aggravating circumstances’; Finmeccanica in the light of the assessment that the company was not • for ‘unlawful inducement to give or promise anything of value’, pun- involved in the alleged wrongdoing and had implemented adequate com- ishment is imprisonment of three to eight years for the public official, pliance programmes to prevent corruption offences. Subsequently, Agusta and up to three years for the private briber, and they can be increased Westland Spa and AgustaWestland International Ltd entered into a plea- due to ‘aggravating circumstances’; and bargaining with the Prosecutor’s Office. Finally, on 9 October 2014, the • for ‘instigation to bribery’ (see question 3), the punishments pro- court of first instance of Busto Arsizio acquitted the top managers of both vided for ‘proper’ bribery and for ‘bribery for the performance of the companies from the charge of foreign corruption, and sentenced them to function’ apply, reduced by one-third. two years’ imprisonment for the different charge of tax fraud. Appellate proceedings will likely start in the course of 2015. In addition, in the event of conviction, confiscation of the ‘profit’ or of the ‘price’ of the bribery offence has to be applied (even ‘for equivalent’, on New investigations assets of the offender for a value corresponding to the profit or price of the New investigations for alleged foreign bribery are currently pending offence; article 322-ter ICC). against the companies ENI and Saipem, and their managers, in relation As far as corporations are concerned, they are subject to sanctions to the adjudication of licences or public tenders in Nigeria and Algeria. In consisting of fines, disqualifications and confiscation. Disqualifications particular: can be particularly damaging, because they can include the suspension • with respect to Nigeria, on November 2013, the Milan Prosecution’s or revocation of government concessions, debarment, exclusion from Office started a new criminal investigation against the company ENI government financing and even prohibition from carrying on business Spa, its top managers and some Italian and foreign intermediaries, in activity (articles 9 to 13 of Legislative Decree No. 231/2001). Such sanc- relation to the alleged offence of bribery of Nigerian public officials, in tions can also be applied at a pretrial stage, as interim coercive measures. relation to the granting in 2011 by the Nigerian government to the sub- In the event of conviction, confiscation of the ‘profit’ or of the ‘price’ of the sidiaries of Eni and Shell of the oil-prospecting licence of an oil field offence has to be applied, even by confiscating ‘for equivalent’ the assets of located in the offshore territorial waters of Nigeria. The proceeding is the corporation (article 19 of Legislative Decree No. 231/2001). At a pretrial still at the investigative stage; and stage, prosecutors can request the competent judge to grant freezing of the • with respect to Algeria, the Milan Prosecution’s Office started in the ‘profit’ or ‘price’ of the bribery offence (article 45 of Legislative Decree No. past years a criminal investigation against the companies ENI Spa and 231/2001). its subsidiary Saipem spa, some of their top managers and foreign intermediaries, in relation to the alleged offence of bribery of Algerian public officials, with respect to the adjudication of several tenders in Algeria in the period 2007–2010. The proceeding is still at the investi- gative stage. www.gettingthedealthrough.com 109 ITALY Studio Legale Pisano
Financial record keeping 24 Public officials 17 Laws and regulations How does your law define a public official and does that definition include employees of state-owned or state- What legal rules require accurate corporate books and records, controlled companies? effective internal company controls, periodic financial statements or external auditing? See the definition of ‘public official’ and ‘person in charge of a public ser- vice’ in question 4. With respect to employees of state-owned or state- The relevant provisions on all mentioned points are contained in the controlled companies, they are not expressly included within the legal Italian Civil Code of 1942. With respect to balance sheets of limited liabil- definition, but they implicitly fall within the relevant ‘public’ categories on ity companies, article 2423 of the Italian Civil Code provides that the bal- the condition that the activity effectively carried out is governed by public ance sheet has to be drawn up with transparency and has to represent in a law or has a public nature. true and fair view the governance and financial situation of the company and the economic result of the financial period. Articles 2423-bis to 2429 of 25 Public official participation in commercial activities the Italian Civil Code provide for the criteria to be followed for the drafting of the balance sheet, and for the tasks to be accomplished by the board of Can a public official participate in commercial activities while directors and by the internal auditors on the point. serving as a public official? The duty to appoint internal auditors, and their tasks, are provided for In principle, public officials cannot participate in commercial activities, as by article 2397ff of the Italian Civil Code. In particular, according to article expressly stated in relation to state employees by Legislative Decree No. 2403 of the Italian Civil Code, the internal auditors control the compliance 3/1957 (article 60). However, owing to the lack of comprehensive regula- with the law, the by-laws and with the principles of fair administration, and tion some exceptions do exist. they in particular control the adequacy of the organisational, administra- tive and accounting structure adopted by the company and its concrete 26 Travel and entertainment functioning. The duty to appoint an auditing firm for the controls on the accounting is provided for by article 2409-bis ff of the Italian Civil Code. Describe any restrictions on providing domestic officials With respect to listed companies, Italian law provides for more strin- with gifts, travel expenses, meals or entertainment. Do the gent internal and external company controls. restrictions apply to both the providing and receiving of such benefits? 18 Disclosure of violations or irregularities See question 5. To what extent must companies disclose violations of anti- bribery laws or associated accounting irregularities? 27 Gifts and gratuities Companies have no obligation to disclose violations of anti-bribery laws or Are certain types of gifts and gratuities permissible under your associated accounting irregularities. Internal and external auditors have a domestic bribery laws and, if so, what types? duty to signal the relevant violations, and they are responsible for damages in the event of non-compliance. See question 5.
19 Prosecution under financial record keeping legislation 28 Private commercial bribery Are such laws used to prosecute domestic or foreign bribery? Does your country also prohibit private commercial bribery? In the 1990s investigations of companies’ accounts were largely used as a Until 2002, bribery offences were only applicable to the bribery of ‘pub- tool to discover bribery payments, and the offence of false accounting was lic officials’ or ‘persons in charge of a public service’. In 2002, an offence often brought jointly with one of domestic bribery. Legislative Decree No. related to the corruption of private corporate officers has been introduced 61/2002 has amended the definition of false accounting offences, largely by article 2635 of the Italian Civil Code, punishable by imprisonment for up reducing their sphere of application. to three years, for both the briber and the corporate officer, on the condition that the corporation suffers damage from it and that the bribe is given or 20 Sanctions for accounting violations offered to its directors, general managers, internal auditors, liquidators or external auditors. Law No. 190/2012 has extended the reach of the offence What are the sanctions for violations of the accounting rules to bribery of managers in charge of the accounting books and to bribery of associated with the payment of bribes? ordinary employees, who are subject to the direction or supervision of the If the payment of bribes does amount to a false accounting offence, Italian top managers; in this latter case, punishment is imprisonment up to one law provides, with respect to listed companies, a penalty of imprisonment year and six months. A precondition for prosecuting the offence is a crimi- for between one and four years (article 2622 of the Italian Civil Code) and, nal complaint filed by the victim, unless the crime generates a distortion of with respect to non-listed companies, imprisonment for up to two years competition in the acquisition of goods or services. The punishments are (article 2621 of the Italian Civil Code). doubled in relation to corporations listed in Italy or in the European Union. No relevant case law has yet been developed on this offence. 21 Tax-deductibility of domestic or foreign bribes 29 Penalties and enforcement Do your country’s tax laws prohibit the deductibility of What are the sanctions for individuals and companies violating domestic or foreign bribes? the domestic bribery rules? Yes, absolutely. See question 15. Domestic bribery 30 Facilitating payments 22 Legal framework Have the domestic bribery laws been enforced with respect to Describe the individual elements of the law prohibiting bribery facilitating or ‘grease’ payments? of a domestic public official. As explained in questions 5 and 6, facilitating or ‘grease’ payments are pro- See question 2. hibited by Italian law.
23 Prohibitions Does the law prohibit both the paying and receiving of a bribe? Yes. See question 2.
110 Getting the Deal Through – Anti-Corruption Regulation 2015 Studio Legale Pisano ITALY
31 Recent decisions and investigations was prohibited from entering into contracts with the public administration Identify and summarise recent landmark decisions and for one year. investigations involving domestic bribery laws, including any The G8 case investigations or decisions involving foreign companies. The G8 case concerns allegations of corruption against government In relation to domestic bribery offences, several investigations and pros- members in connection with the adjudication of public tenders regarding ecutions have been conducted by Italian authorities in recent years, also restructuring and building projects, in connection with the G8 summit held involving foreign companies. The following cases can be mentioned. in Italy in June 2009. In October 2012, in a relevant leg of the prosecution, the Rome court of first Infstance sentenced both the public officials and The Enipower case private parties involved to punishments ranging from two to about four This case concerns an investigation started in 2003 by the Milan years’ imprisonment. Appellate proceedings are currently pending. In Prosecutor’s Office for the alleged payment of bribes by several private another leg of the prosecution, in September 2013 the judge of the prelimi- parties to officers of the companies Enipower SpA and Snamprogetti SpA nary hearing in Rome ordered the committal for trial for some individuals (controlled by the state-owned company ENI), for the obtaining of public charged with corruption and conspiracy. The first-instance trial started in contracts and supplying. Some of the defendants, individuals and compa- January 2014. nies have already been sentenced by court decisions or entered into plea bargaining according to court authorisation. The Lombardy region case Prosecutions are currently pending against top politicians and officers The Siemens AG case of the Lombardy region for allegedly having facilitated the obtaining of This case started in connection with the Enipower case mentioned above, public health-care funds by certain private hospitals, in exchange for and concerned the alleged payment of bribes by Siemens’ officers to money or other benefits in kind. In a first leg of the prosecution, on 27 Enipower’s officers for obtaining and supplying public contracts. The November 2014, the Milan court of first instance sentenced to five years great significance of the case relates to the fact that, in April 2004, the of imprisonment a former member of the Lombardy regional assembly. In Milan court applied for the first time the provisions on corporate criminal another leg, involving the former President of the Lombardy region, the responsibility to a foreign corporation (see questions 8, 14 and 15), and trial of first instance started on 6 May 2014 for the offences of corruption even at a pretrial stage as interim coercive measures (Siemens was pro- and conspiracy, and it is currently pending . hibited from entering into contracts with the Italian public administration for one year). The conviction of Siemens AG and of its officers has been The Expo 2015 case subsequently confirmed by the Milan court. The Expo 2015 case concerns an investigation for corruption conducted by the Prosecution’s Office of Milan, regarding the adjudication of public ten- The My Chef case ders for building projects, food services, etc, in connection with Expo 2015, The My Chef case concerns the alleged payment of bribes by officers of the which will take place in Milan in May 2015. In the course of 2014, many Italian company My Chef to public officials of INAIL (the Italian National of the persons under investigation were subject to pretrial custody orders, Institute for Insurance against Occupational Accidents) for the adjudica- and subsequently applied for plea bargaining with the Prosecution’s Office. tion of a public tender for the supplying of restaurant tickets to INAIL’s The judge of the preliminary hearing, on 27 November 2014, granted most employees. In March 2007 My Chef was sentenced by the Milan court in of the requested plea bargaining, applying convictions ranging from two accordance with the provisions on corporate criminal responsibility and it years and six months to three years and four months.
Studio Legale Pisano
Roberto Pisano [email protected] Valeria Acca [email protected]
Via Cino del Duca 5 Tel: +39 02 7600 2207 20122 Milan Fax: +39 02 7601 6423 Italy www.pisanolaw.com
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Japan
Yoshihiro Kai Anderson Mo¯ri & Tomotsune
1 International anti-corruption conventions or having the foreign public official or other similar person use his or her To which international anti-corruption conventions is your position to influence other foreign public officials or other similar persons to act or refrain from acting in a particular way in connection with that country a signatory? person’s duties’. Japan is a signatory to the OECD Convention on Combating Bribery of Please note that not only the giving of the bribe, but also the offering or Foreign Public Officials in International Business Transactions (the OECD promising of the bribe is punishable under the UCPA. Convention). This was signed on 17 December 1997 and ratified on 13 October 1998. 4 Definition of a foreign public official Based on this, the Unfair Competition Prevention Act (Act No. 47 of 1993; How does your law define a foreign public official? see question 2) (the UCPA) was amended in 1998 and bribery of foreign public officials became criminalised in Japan. Under the UCPA, it is prohibited to give bribes not only to foreign public Japan is also a signatory to the United Nations Convention against officials per se, but also to other persons in a position of a public nature. Transnational Organized Crime, which was signed in December 2000 Such persons are included in the definition of ‘foreign public officials, etc’. and ratified on 14 May 2003, and the United Nations Convention against Article 18, paragraph 2 of the UCPA defines a foreign public official, etc, as: Corruption, which was signed on 9 December 2003 and ratified on 2 June (i) a person who engages in public service for a foreign state, or local 2006. authority (a public official in a narrow sense); (ii) a person who engages in service for an entity established under a spe- 2 Foreign and domestic bribery laws cial foreign law to carry out special affairs in the public interest (ie, a person engaging in service for a public entity); Identify and describe your national laws and regulations (iii) a person who engages in the affairs of an enterprise: prohibiting bribery of foreign public officials (foreign bribery • for which the number of voting shares or the amount of capital laws) and domestic public officials (domestic bribery laws). subscription directly owned by one or more foreign states or local Bribery of foreign public officials is criminally punishable under the UCPA. authorities exceeds 50 per cent of that enterprise’s total issued Violators may be imprisoned for up to five years or fined up to ¥5 million voting shares or total amount of subscribed capital; or (article 21, paragraph 2 of the UCPA). • for which the number of officers (including directors and other Bribery of domestic public officials is criminally punishable under the persons engaging in the management of the business) appointed Penal Code (Act No. 45 of 1907). or designated by one or more foreign state or local authorities The prohibitions on foreign bribery and domestic bribery are based exceeds 50 per cent of that enterprise’s total number of officers; upon different philosophies. That is to say, the former is aimed at secur- and ing and promoting the sound development of international trade, while • to which special rights and interests are granted by the foreign the latter is aimed at ensuring the rectitude of the Japanese public service state or local authorities for performance of their business; and maintaining people’s trust in such rectitude. As a consequence of this • or a person specified by a cabinet order (see below) as an ‘equiva- difference, the prohibition of foreign bribery was not incorporated in the lent person’ (ie, a person engaging in the affairs of an enterprise of Penal Code but in the UCPA. a public nature); (iv) a person who engages in public services for an international organisa- Foreign bribery tion constituted by governments or intergovernmental international organisations; or 3 Legal framework (v) a person who engages in affairs under the authority of a foreign state or Describe the elements of the law prohibiting bribery of a local government or an international organisation. foreign public official. The cabinet order referred to in (iii) above (Cabinet Order No. 388 of 2001) In order for bribery of a foreign public official to be punished under the states that an ‘equivalent person’ is any person who engages in the affairs UCPA, the bribe must be paid with regard to an ‘international commercial of the following enterprises (see below) to which special rights and inter- transaction’ (article 18, paragraph 1). An ‘international commercial trans- ests are granted by foreign states or local authorities for the performance action’ means any activity of international commerce, including interna- of their business: tional trade and cross-border investment. The bribe must be provided to (a) an enterprise for which the voting rights directly owned by one or foreign public officials or others as defined in question 4. more foreign states or local authorities exceeds 50 per cent of that The prosecutor must then establish that the bribe was made ‘in order enterprise’s total voting rights; to obtain illicit gains in business’. Here, ‘gains in business’ means any gains (b) an enterprise for which a shareholders’ resolution cannot become that business persons may obtain during the course of their business activi- effective without the approval of a foreign state or local authority; or ties, which include, for example, the acquisition of business opportuni- (c) an enterprise: ties or governmental approvals regarding the construction of factories or • for which the number of voting shares or the amount of capital import of goods. subscription directly owned by foreign states, local authorities or Further, the prosecutor must establish that the bribe was made ‘for the ‘public enterprises’ (defined below) exceeds 50 per cent of that purpose of having the foreign public official or other similar person act or enterprise’s total voting shares or capital subscription; refrain from acting in a particular way in connection with his or her duties,
112 Getting the Deal Through – Anti-Corruption Regulation 2015 Anderson Mo¯ri & Tomotsune JAPAN
• for which the number of voting rights directly owned by foreign others’ trademarks (registered or unregistered) or trade secrets, as well as states, local authorities or public enterprises exceeds 50 per cent other activities that are against fair competition. The UCPA defines such of that enterprise’s total voting rights; or acts as ‘unfair competition’ (article 2), and there are special civil remedies • for which the number of officers (including directors and other and related treatments available for unfair competition, such as injunc- persons engaging in the management of the business) appointed tions, presumed damages and document production systems, etc. by foreign states, local authorities or public enterprises exceeds However, foreign bribery is explicitly excluded from the definition 50 per cent of that enterprise’s total number of officers. of ‘unfair competition’, and there are no special civil remedies or related treatments available for the violation of foreign bribery restrictions under The cabinet order defines ‘public enterprise’ as an enterprise as set out in the UCPA. (iii) above, and an enterprise as set out in (a) and (b) above. Claims for damages and compensation may be possible based upon An ‘international organisation’ referred to in (iv) above must be consti- tort. However, in reality, it would be difficult for a plaintiff to prove the tuted by a governmental or inter-governmental international organisation necessary causal relationship between the bribe and his or her loss of a (for example, the UN, ILO, WTO, etc). Therefore, international organisa- business opportunity as well as the amount of damages. So far, there has tions constituted by private organisations are outside of the scope of the been no case reported where victims of foreign bribery (for example, com- foreign bribery regulations under the UCPA. According to the Guidelines petitors of a violator who lost business opportunities because of the viola- for the Prevention of Bribery to Foreign Officials set by the Ministry of tor’s payment of a bribe) filed a civil lawsuit against the violator to recover Economy, Trade and Industry, which were most recently amended in the damages they suffered. 2010 (the Guidelines), an illicit payment to an officer of the International As to criminal enforcement, see questions 2, 8 and 10. Olympic Committee cannot be punished because it is constituted by pri- vate organisations. 10 Agency enforcement For the definition of a public official under a domestic bribery law, see What government agencies enforce the foreign bribery laws question 24. and regulations? 5 Travel and entertainment restrictions There is no special government agency to enforce the foreign bribery laws To what extent do your anti-bribery laws restrict providing and regulations. Like other criminal laws, the foreign bribery laws are enforced by the Public Prosecutor’s Office and the police departments of foreign officials with gifts, travel expenses, meals or each prefecture. entertainment? The UCPA does not have any rules differentiating gifts, travel expenses, 11 Leniency meals or entertainment from other benefits to be provided to foreign pub- Is there a mechanism for companies to disclose violations in lic officials. This means that the provision of any gifts, travel expenses, exchange for lesser penalties? meals or entertainment could be considered as illegal bribery in the same way as the provision of cash or any other benefits. No. If a person who committed a crime surrendered himself or herself before being identified as a suspect by an investigative authority, his or her 6 Facilitating payments punishment may be reduced (article 42, paragraph 1 of the Penal Code). However, since this provision obviously assumes that a violator is an indi- Do the laws and regulations permit facilitating or ‘grease’ vidual, companies themselves will not be able to enjoy the benefit of self- payments? surrender under the said provision. The UCPA does not permit ‘facilitation payments’. The Guidelines provide that such small facilitation payments shall be punishable if they are given 12 Dispute resolution ‘in order to obtain illicit gains in business’. Can enforcement matters be resolved through plea agreements, settlement agreements, prosecutorial discretion 7 Payments through intermediaries or third parties or similar means without a trial? In what circumstances do the laws prohibit payments through Japanese criminal procedure does not have systems such as plea bargaining intermediaries or third parties to foreign public officials? or settlement agreements. However, public prosecutors (who are, in prin- Payments of bribes to foreign public officials are prohibited, whether they ciple, exclusively granted the power to decide whether or not to prosecute are made directly or through intermediaries. While the relevant provision accused persons under article 248 of the Code of Criminal Procedure (Act makes no express reference to intermediaries, it is sufficiently broad to No. 131 of 1948)), may choose an immediate judgement procedure where a capture and punish the payment of bribes through intermediaries. hearing and a judgment will be issued within a day; provided however, that However, in order for a person to be held liable for paying a bribe to these proceedings are conditional on the consent of the person to be accused foreign public officials through intermediaries, such person must recognise (article 350-2, paragraph 2 of the Code of Criminal Procedure). This imme- that the cash or other benefits provided by him or her to the intermediaries diate judgment procedure is not available for a case where the death pen- will be used for the payment of a bribe to such officials. For example, if a alty, imprisonment without term or imprisonment with a term not less than person appoints an agent in order to obtain an order from a foreign govern- one year may be applied (article 350-2, paragraph 1 of the Code of Criminal ment and the appointer fully recognises that part of the fee he or she pays Procedure). Public prosecutors may also choose summary proceedings at to the agent will be used to bribe an official of the foreign government, then summary courts, where no hearings will be held and all examinations will the appointer may be punished. On the other hand, if the appointer was be done on a paperwork basis; provided, however, that the summary pro- unaware of such fact, then the appointer will not be punished. ceedings are also conditional on the consent of the person to be accused (article 461-2, paragraph 2 of the Code of Criminal Procedure). In this sum- 8 Individual and corporate liability mary procedure, summary courts can only impose on criminals fines of up Can both individuals and companies be held liable for bribery to ¥1 million and the summary courts cannot sentence the accused persons to imprisonment (article 461 of the Code of Criminal Procedure). of a foreign official? Yes, both individuals and companies can be held liable for bribery to for- 13 Patterns in enforcement eign public officials (article 22, paragraph 1 of the UCPA). Describe any recent shifts in the patterns of enforcement of the foreign bribery rules. 9 Civil and criminal enforcement Is there civil and criminal enforcement of your country’s Although foreign bribery laws in Japan were once rarely enforced, Japanese authorities are paying more attention to corruption than ever before. foreign bribery laws? In 2007, two employees of a Filipino subsidiary of Kyushu Electric As mentioned above, Japanese foreign bribery laws are included in the Power Co gave Filipino government officials golf sets whose value was UCPA. The UCPA was originally intended to prohibit unauthorised use of approximately ¥800,000 in relation to the subsidiary’s entry into the www.gettingthedealthrough.com 113 JAPAN Anderson Mo¯ri & Tomotsune
Filipino market for digital fingerprint recognition systems. The two indi- UCPA). When a representative, agent or any other employee of a company viduals were prosecuted for violation of the UCPA. Both of the individuals has violated the foreign bribery laws with regard to the business of the admitted that they had violated the foreign bribery laws, and were fined company, the company may be fined up to ¥300 million (article 22, para- ¥500,000 and ¥200,000, respectively, through the summary proceedings graph 1 of the UCPA). mentioned above. In 2008, two officers and one high-level employee of KK Pacific 16 Recent decisions and investigations Consultants International, a Japanese construction consulting company, Identify and summarise recent landmark decisions or were prosecuted for violation of the UCPA because they repeatedly bribed investigations involving foreign bribery. a Vietnamese official in order to win an ODA business (highway construc- tion) opportunity. The bribe was approximately ¥90 million in total. In In 2011, the OECD Working Group conducted the Phase 3 evaluation of 2009, each of the three individuals was sentenced to imprisonment for Japan’s implementation of the OECD Convention. At that time, there had one-and-a-half to two years, with their sentences suspended for three been only two cases (the Kyushu Electric Power Co case and the KK Pacific years. In addition, the company was fined ¥70 million. Consultants International case) where anyone had actually been prosecuted In 2013, an ex-director of Futaba Industrial Co Ltd, a major Japanese for violation of the UCPA. Accordingly, the December 2011 OECD Phase 3 car silencer company, was prosecuted for violation of the UCPA because Report on Japan stated that prosecutions of only two foreign bribery cases he had bribed a Chinese official to overlook the illegal operation of Futaba in 12 years appears to be a very low figure in view of the size of the Japanese Industrial Co Ltd’s local Chinese factory in December 2007. The bribe economy. After this evaluation, Japanese investigative authorities made included cash amounting to HK$30,000 as well as an expensive ladies’ efforts to detect foreign bribery cases and prosecuted two further cases handbag. This case was dealt with through summary proceedings and the (the Futaba Industrial Co Ltd case and the Japan Transportation Consultants ex-director was fined ¥500,000. The news media reported that there were Inc case). For details of the four cases refer to question 13. further bribes of more than ¥50 million to several people including customs Aside from the prosecuted cases, it was also announced that foreign staff, but these were not taken into consideration owing to the statute of employees of a Singaporean subsidiary of Sumitomo Chemical Company limitations. Ltd had committed acts of bribery in relation to high-ranking officials in In 2014, three former executives of Japan Transportation Consultants Cambodia amounting to approximately ¥26 million in total in order to win Inc, a Japanese railway consultancy company, were prosecuted for violating orders for insect repellent nets during the 2006 to 2010 period. However, the UCPA because they bribed railway officials with ¥144 million in kick- there has been no information concerning indictments with respect to this backs, in connection with Japanese government-funded railway projects in case. Vietnam, Indonesia and Uzbekistan. The company was also prosecuted and In other jurisdictions, it was announced that the US Department of the defendants pleaded guilty at trial. Justice had granted both JGC Corporation (a well-known Japanese engi- neering company) and Marubeni Corporation (a well-known Japanese 14 Prosecution of foreign companies trading company) immunity in exchange for paying fines of respectively In what circumstances can foreign companies be prosecuted $218.8 million and US$54.6 million under the US FCPA in connection with suspected bribery of a Nigerian official relating to an LNG plant project in for foreign bribery? 2011 and 2012. It was also announced that the US Department of Justice Like Japanese nationals and companies, foreign companies can be pros- had granted Bridgestone Corporation, a well-known Japanese rubber man- ecuted for foreign bribery because article 22, paragraph 1 of the UCPA (see ufacturer, immunity in exchange for paying a fine of $28 million under the question 15) does not make any distinction between domestic companies US FCPA in connection with the suspected bribery of government officials and foreign companies. However, this does not mean that foreign com- of central and south American countries in relation to marine hose sales. panies can be prosecuted with no jurisdictional basis. Under the Japanese In 2014, it was also announced that Marubeni Corporation entered a guilty criminal law system, any crime committed within the territory of Japan plea for its participation in a scheme to pay bribes to high-ranking govern- should be punishable (article 1 of the Penal Code), and it is generally con- ment officials in Indonesia to secure a power project, and paid a fine of $88 sidered that when all or part of an act constituting a crime was conducted in million under the US FCPA. To the best of our knowledge, however, there is Japan or all or part of the result of a crime occurred in Japan, such a crime is no information suggesting that the Japanese authorities are going to pros- deemed to have been committed within Japan and therefore is punishable. ecute these matters under the UCPA. For example, if an employee of a US company, who may or may not be a Japanese national, invites a public official of the Chinese government to Financial record keeping Japan and provides a bribe to that official in Japan in violation of the UCPA, then not only the employee, but also the US company can be punished 17 Laws and regulations under the UCPA. However, from a practical point of view, there may be What legal rules require accurate corporate books and records, procedural difficulties in the enforcement of Japanese foreign bribery laws effective internal company controls, periodic financial against such a foreign company if it has no place of business in Japan or no statements or external auditing? business activities in Japan. Another possible circumstance where foreign companies can be Laws and regulations that require companies to keep accurate corporate prosecuted under the UCPA is where a foreign company hires a Japanese books and records, prepare periodic financial statements and, in the case national and the Japanese national gives a bribe to a foreign official on of large companies, undergo external auditing include the Companies Act behalf of his or her employer (the foreign company), either inside or outside (Act No. 86 of 2005) and the Company Accounting Regulations. In addi- of Japan. This is because the UCPA stipulates that Japanese foreign bribery tion, the Financial Instruments and Exchange Law (Act No. 25 of 1948) laws shall apply to any Japanese nationals who commit foreign bribery not (FIEL) requires public companies to keep accurate corporate books and only in Japan, but also outside of Japan (article 21, paragraph 6 of the UCPA, records, prepare periodic financial statements, and establish effective article 3 of the Penal Code). internal control systems. For example, if a US company, which has no Japan-based business, hires a Japanese national in the US and the Japanese national gives a bribe 18 Disclosure of violations or irregularities to an official of the US government in the US, then we could not deny the To what extent must companies disclose violations of anti- theoretical possibility that the US company could be prosecuted under the UCPA of Japan. From a practical point of view, however, there may be bribery laws or associated accounting irregularities? procedural difficulties in the enforcement of Japanese foreign bribery laws Companies are not obliged to disclose violations of anti-bribery laws or against foreign companies in such circumstances. associated accounting irregularities under the laws regarding financial record keeping. In the case of public companies, if the associated account- 15 Sanctions ing irregularities are considered so ‘material’ that the irregularities may What are the sanctions for individuals and companies violating affect the decision-making of investors, then the companies may be the foreign bribery rules? required to disclose such irregularities under the FIEL. Individuals violating the foreign bribery laws may be imprisoned for up to five years, and/or fined up to ¥5 million (article 21, paragraph 2 of the
114 Getting the Deal Through – Anti-Corruption Regulation 2015 Anderson Mo¯ri & Tomotsune JAPAN
19 Prosecution under financial record keeping legislation In addition, some special laws deem officials of private organisations, Are such laws used to prosecute domestic or foreign bribery? which private organisations are closely related to the public interest, to be public officials, and bribes to such officials are also prohibited. Public- offi They are not directly intended to be used for prosecution of domestic or cials so deemed include employees of the Nippon Telegraph and Telephone foreign bribery. However, it would be possible to use such laws in order to Corporation, professors of public universities and officials of public funds. indirectly punish bribery if a company engages in false book-keeping in order to create large slush funds for the purpose of bribery. 25 Public official participation in commercial activities Can a public official participate in commercial activities while 20 Sanctions for accounting violations serving as a public official? What are the sanctions for violations of the accounting rules associated with the payment of bribes? National public officials are prohibited from participating in commer- cial activities while serving as public officials, except when approved by There are no specific sanctions for violating the accounting laws associated the National Personnel Authority (article 103, paragraphs 1 and 2 of the with the payment of bribes. However, if there is a materially false state- National Public Service Act (Act No. 120 of 1947)). Local public officials ment (eg, fictitious description or intentional omission concerning the must obtain similar approval from those who appointed them to their posts amount of bribes) in securities reports to be submitted by a company under in order to participate in commercial activities (article 38, paragraph 1 of the FIEL, the person who submitted such securities reports may be impris- the Local Public Service Law). oned up to 10 years and/or fined up to ¥10 million (article 197, paragraph 1 of the FIEL), and the company may also be fined up to ¥700 million (article 26 Travel and entertainment 207, paragraph 1 of the FIEL). Whether such false statements are deemed Describe any restrictions on providing domestic officials as ‘materially’ false statements will depend on the amount of the bribe, the with gifts, travel expenses, meals or entertainment. Do the financial condition of the company, the amount of potential penalties and other factors. restrictions apply to both the providing and receiving of such benefits? 21 Tax-deductibility of domestic or foreign bribes Even if gifts, entertainment or other benefits are intended as a courtesy, Do your country’s tax laws prohibit the deductibility of they could be considered an illegal bribe (regardless of their value) if domestic or foreign bribes? they are given for and in connection with the duties of the relevant public official. Yes. Article 55, paragraph 5 of the Corporate Tax Law (which applies to Certain high-level national government officials are obliged to report domestic corporations and also to foreign corporations mutatis mutandis any gifts or benefits from business entities if the value of such gifts or bene- pursuant to article 142 of the same law) stipulates that the amount spent fits exceeds ¥5,000 (article 6 of the National Public Service Ethics Act (Act for domestic or foreign bribes shall not be tax-deductible. A criminal court No. 129 of 1999)). Whether this reporting requirement applies is different need not determine that such expenditure took the form of a bribe in order from whether the gifts or benefits in question constitute bribes. for tax authorities to deny the deductibility of such expenditure. 27 Gifts and gratuities Domestic bribery Are certain types of gifts and gratuities permissible under your 22 Legal framework domestic bribery laws and, if so, what types? Describe the individual elements of the law prohibiting bribery See question 26. of a domestic public official. In order for bribery of a domestic public official to be punished under the 28 Private commercial bribery Penal Code, the bribe must be paid in connection with the relevant pub- Does your country also prohibit private commercial bribery? lic official’s duties. In the Penal Code, the term ‘public official’ means a national or local government official of Japan, a member of an assembly Japanese law does not impose a general prohibition on private commercial or committee, or other employees engaged in the performance of public bribery. However, if a director, or similar official, of a stock corporation, duties of Japan in accordance with laws and regulations (article 7, para- in response to unlawful solicitation, accepts, solicits or promises to accept graph 1 of the Penal Code). any benefit of a proprietary nature in connection with his or her duties, Cash, gifts or anything that satisfies one’s desires or demands can be such person may be punished by imprisonment for up to five years or a fine a bribe under Japanese domestic bribery law, provided that it is given in of up to ¥5 million. In addition, the benefit received by such person shall connection with the duties of a public official. be confiscated, while the person who gives, offers or promises to give the benefit may be punished by imprisonment for up to three years or a fine of 23 Prohibitions up to ¥3 million (articles 967 and 969 of the Companies Act). In addition, some special laws prohibit bribery to deemed public Does the law prohibit both the paying and receiving of a bribe? officials of certain private organisations, as mentioned in question 24. Yes, both paying for and receiving a bribe are prohibited by the Penal Code. See question 29. 29 Penalties and enforcement What are the sanctions for individuals and companies violating 24 Public officials the domestic bribery rules? How does your law define a public official and does that A person who gives, offers or promises to give a bribe to a public official definition include employees of state-owned or state- may be imprisoned for up to three years or fined up to ¥2.5 million (article controlled companies? 198 of the Penal Code). Companies are not punished for their employees’ bribery under the Penal Code. A public official is defined as a national or local government official, or a Sanctions against public officials are different, depending on the -cir member of an assembly or committee or other employee engaged in the cumstances. A public official who simply accepts, solicits or promises performance of public duties in accordance with laws and regulations (arti- to accept a bribe in connection with his or her duties may be imprisoned cle 7, paragraph 1 of the Penal Code) (see question 22). Thus, employees of for up to five years (article 197, paragraph 1 of the Penal Code). If an offi- state-owned or state-controlled companies are not necessarily included cial agrees to perform a certain act in response to a request, the sanction within this definition. However, persons that are not included in this defi- may be increased to imprisonment for up to seven years (article 197, para- nition may be deemed a public official by specific statutes. For example, graph 1 of the Penal Code). If a public official commits any of the conduct officers and employees of the Bank of Japan are deemed public officials described above and later actually acts illegally or refrains from properly (article 30 of the Bank of Japan Act). For the definition of a foreign public acting in the exercise of his or her duty, he or she may be imprisoned for official, see question 4. one year or longer (article 197-3 paragraph 1 of the Penal Code). A former www.gettingthedealthrough.com 115 JAPAN Anderson Mo¯ri & Tomotsune public official may be imprisoned for up to five years, if he or she received a bribe in connection with his or her illegal performance of a duty or inaction Update and trends in response to a request during his or her public service in the past (arti- cle 197-3, paragraph 3 of the Penal Code). These are typical circumstances Until the late 1980s, more than 100 domestic bribery cases were detected by Japanese police every year. This number has decreased of domestic bribery and some derivative circumstances are also punished rapidly over the past decade and only 25 bribery cases were detected under the Japanese Penal Code. in 2013. Bribery is one of the most difficult crimes for Japanese A bribe accepted by a public official will be confiscated. If all or part of investigative authorities to detect and investigate. In order to the bribe cannot be confiscated, then an equivalent sum of money shall be develop a new criminal justice system that moves with the times, collected (article 197-5 of the Penal Code). the Japanese government is considering adopting witness immunity. In addition, the government is considering the introduction 30 Facilitating payments of prosecutorial bargaining and agreements with suspects or defendants that, in return for testimony regarding another person’s Have the domestic bribery laws been enforced with respect to crime, the public prosecutor will refrain from prosecuting the facilitating or ‘grease’ payments? suspect or suggest a lenient sentencing opinion to the court. These new criminal justice systems are applicable to bribery offences and Yes. Japanese domestic bribery law does not differentiate ‘grease’ pay- could have a significant impact on the criminal investigation and ments from other benefits, and such payments can constitute a bribe. trial of bribery cases.
31 Recent decisions and investigations Identify and summarise recent landmark decisions and In 2012, a former professor of the Kyoto University Graduate School investigations involving domestic bribery laws, including any of Pharmaceutical Sciences was prosecuted for receiving bribes amount- investigations or decisions involving foreign companies. ing to ¥6.2 million from a medical device sales company. (A professor of In 2009, the Supreme Court found that a former official in the Central a public university in Japan is deemed a public official.) The president of Procurement Office of the Defence Agency (subsequently reorganised as the medical device sales company was also prosecuted for extending such the Ministry of Defence), who deliberately overpaid refund claims from a bribes. It is alleged that the professor provided research and development private manufacturer, was guilty of the crime of bribery. The official over- funding from the university to the medical device company, in return for paid the refund obligations of the Defence Agency and thereby paid the such bribes. manufacturer an additional sum of money to which it was not entitled. In 2013, a foreign financial institution employee and an employees’ Shortly after the payment, the official retired from the Defence Agency and pension fund official, both of whom are Japanese nationals, were arrested became a part-time adviser to the manufacturer. While a part-time adviser, and indicted on suspicion of the crime of bribery (an employees’ pension the former official was paid a higher salary as consideration for the over- fund official is deemed to be a public official). It is suspected that the -finan payment he arranged while he worked at the Defence Agency. This was cial institution employee had provided approximately ¥900,000 in the recognised as bribery. form of travel, golf and other entertainment services to induce the purchase of financial instruments in the amount of ¥1 billion.
Yoshihiro Kai [email protected]
Akasaka K Tower 2-7 Tel: +81 3 6888 1000 Motoakasaka 1-chome Minato-ku www.amt-law.com Tokyo 107-0051 Japan
116 Getting the Deal Through – Anti-Corruption Regulation 2015 Mboya Wangong’u & Waiyaki Advocates KENYA
Kenya
Godwin Wangong’u and CG Mbugua Mboya Wangong’u & Waiyaki Advocates
1 International anti-corruption conventions The Penal Code provides that any person who, being employed in the To which international anti-corruption conventions is your public service, does or directs to be done, in abuse of the authority of his office, any arbitrary act prejudicial to the rights of another is guilty of a felony. country a signatory? The Proceeds of Crime Act provides that any person who acquires • United Nations Convention against Corruption (in 2003); property (including money) and knows or ought reasonably to have known • Africa Convention on Preventing and Combating Corruption (in that it is part of the proceeds of a crime (including bribery) committed by 2007); and another person commits an offence. • United Nations Convention against Transnational Organized Crime (in 2004). 4 Definition of a foreign public official How does your law define a foreign public official? 2 Foreign and domestic bribery laws There is no express definition of a foreign public official in local statutes. Identify and describe your national laws and regulations The Constitution of Kenya permits the adoption of the definitions of inter- prohibiting bribery of foreign public officials (foreign bribery national instruments ratified by Kenya. The definition according to the UN laws) and domestic public officials (domestic bribery laws). Convention against Corruption means any person holding a legislative, Kenyan laws that address bribery do so in a general manner. There is no executive, administrative or judicial office of a foreign country, whether distinct statute that makes special provision for incidences of foreign appointed or elected; and any person exercising a public function for a bribery independently from those of domestic bribery. They include: foreign country, including for a public agency or public enterprise. • the Anti-Corruption and Economic Crimes Act of 2003 (ACEC); • the Leadership and Integrity Act 2012; 5 Travel and entertainment restrictions • the Public Officer Ethics Act, Chapter 183 of the Laws of Kenya (POE); To what extent do your anti-bribery laws restrict providing • the Public Procurement and Disposal Act of 2005 (PPDA); foreign officials with gifts, travel expenses, meals or • the Public Procurement Regulations of 2006; entertainment? • the Penal Code, Laws of Kenya – Chapter X of Cap 63 deals with the offence of abuse of office; The law makes it an offence to give to an ‘agent’ or as an agent to receive • the Proceeds of Crime and Anti-Money Laundering Act, 2009; any benefit which would tend to influence favour or disfavour. The offence • the Ethics and Anti-Corruption Commission Act, Act No. 22 of 2011 is also extended to include soliciting for these benefits as well as agreeing and to give or receive such benefits. A benefit means any gift, loan, fee, reward, • the Constitution of Kenya. appointment, service, favour, forbearance, promise or other consideration or advantage. The Anti-Corruption and Economic Crimes Act also regulates acts that were considered as acts of corruption in the Prevention of Corruption Act 6 Facilitating payments (now repealed). The Constitution of Kenya provides that the general rules Do the laws and regulations permit facilitating or ‘grease’ of international law shall form part of the law of Kenya. At article 2(6) it payments? provides that any treaty or convention ratified by Kenya shall form part of the law of Kenya. However, the conventions in question 1 have very few No. Whereas there are no express provisions concerning facilitating pay- express provisions. For the most part they urge state parties to enact legis- ments, the ACEC provides that where a person is charged with an offence lation to combat corruption. under the Act, it shall be no defence that the receiving, soliciting, giving or The Leadership and Integrity Act 2012, which implements article 10 offering of any benefit is customary in any business, undertaking, office, of the Constitution 2010, establishes procedures and mechanisms for the profession or calling. It may therefore be imputed that grease payments are effective administration of constitutional provisions on integrity of leaders not permitted. These payments may also be classified as benefits prohib- and principles of public governance. ited by law (see question 5). The Proceeds of Crime Act also has a wide definition for ‘proceeds Foreign bribery of crime’. It includes any economic advantage derived in connection with an offence such as property into which any property derived or realised 3 Legal framework directly from the offence was later successively converted; and any eco- Describe the elements of the law prohibiting bribery of a nomic gains derived or realised from such property from the time the foreign public official. offence was committed.
The law prohibits corrupt practice, which is defined generally to include 7 Payments through intermediaries or third parties bribery. The PPDA prohibits corrupt practice in procurement proceed- ings. It also provides that procurement and disposal shall be in accordance In what circumstances do the laws prohibit payments through with the code of ethics prescribed by the Public Procurement Oversight intermediaries or third parties to foreign public officials? Authority. The ACEC prohibits bribery of agents. The law defines an agent The PPDA prohibits formation of contracts with employees, public serv- to include a person who, in any capacity whether in the public or private ants or other related persons including corporations other than those sector, is employed by or acts for or on behalf of another person. who are expressly given powers to enter into contracts under the law. The www.gettingthedealthrough.com 117 KENYA Mboya Wangong’u & Waiyaki Advocates provisions of section 39 of the ACEC are made generally so that bribery of • has paid for all losses occasioned by his corruption conduct to public agents in whatever form arising is illegal. property. The Proceeds of Crime Act limits the extent to which a person could assist another in dealings that fall under the definition of corrupt practices. Such a settlement or undertaking would be registered in court. Persons who disclose information to or assist investigators or the 8 Individual and corporate liability EACC are protected under the law from proceedings or action, including Can both individuals and companies be held liable for bribery disciplinary action. of a foreign official? 12 Dispute resolution Yes. The law states that a person who uses his office to improperly confer a Can enforcement matters be resolved through plea benefit on himself or anyone else is guilty of an offence. ‘Person’ in Kenyan agreements, settlement agreements, prosecutorial discretion law includes a company or association or body of persons, whether corpo- or similar means without a trial? rate or unincorporated. Yes. As outlined previously, the law allows the EACC to negotiate and enter 9 Civil and criminal enforcement into an out of court settlement with any person against whom it intends to Is there civil and criminal enforcement of your country’s bring, or has actually brought, a civil claim or application in court. foreign bribery laws? In criminal proceedings, informers are protected from prosecution on account of disclosures made (see question 13). Yes. The law makes bribery an offence for which criminal sanctions are provided under the Penal Code, the ACEC and the Proceeds of Crime Act. 13 Patterns in enforcement Civil proceedings may be instituted by a public body or by the Ethics and Describe any recent shifts in the patterns of enforcement of the Anti-Corruption Commission (EACC), established by the Ethics and Anti- foreign bribery rules. Corruption Commission Act, Act No. 22 of 2011, on its behalf for recovery of public property. Similar provisions are in the Proceeds of Crime Act. The There has been an increase in anti-corruption legislation in recent years. For law also provides that a convicted person is liable to anyone who suffers example, the ACEC was enacted to replace the Prevention of Corruption loss as a result of the crime. The ACEC governs both civil and criminal anti- Act, which was deemed inadequate to complement anti-corruption efforts corruption proceedings by virtue of section 54 of the Act, which requires a in Kenya. The KACC was also disbanded by the Kenyan parliament to give person convicted of the crime to repay his or her victim. way to the EACC. Several amendments have also been made to the ACEC that would facilitate enforcement including the addition of provisions in 10 Agency enforcement the ACEC that permit the EACC to enter into out-of-court settlements as What government agencies enforce the foreign bribery laws opposed to instituting civil proceedings against suspected offenders. This and regulations? has been applied recently in the acquisition of the Grand Regency Hotel (now Laico Regency Hotel). It was alleged that the hotel had been built The EACC is a body corporate established by the Ethics and Anti- using monies illegally acquired from the public. The proprietor handed the Corruption Commission Act, Act No. 22 of 2011, pursuant to Section 79 hotel over to the government in exchange for a pardon on civil proceedings of the Constitution. EACC takes over from the Kenyan Anti-Corruption against him. Commission (KACC) which was disbanded by the Kenyan parliament on There has been increased awareness and advocacy against corruption 24 August 2011 to give way to the EACC. resulting in increased litigation against public officials . The EACC is established by law to investigate corruption and eco- nomic crimes. It also has the power to institute and conduct proceedings in 14 Prosecution of foreign companies court for purposes of the recovery or protection of public property or for the In what circumstances can foreign companies be prosecuted freeze or confiscation of proceeds of corruption or the payment of compen- for foreign bribery? sation and may refer investigated persons for trial in criminal proceedings. In addition, the Chief Justice is empowered to appoint special magis- The ACEC does not distinguish between acts of local and foreign compa- trates to try corruption and economic crimes and related offences. nies and it may therefore be imputed that the provisions of anti-corruption The law also establishes the Public Complaints Standing Committee laws in Kenya apply equally to both. However, this is limited to the jurisdic- to deal with issues of maladministration in the public service. tion that may be exercised by Kenyan authorities over the foreign company. The Penal Code provides that Kenyan courts may exercise jurisdic- 11 Leniency tion over all offences committed wholly within Kenya. In instances where Is there a mechanism for companies to disclose violations in offences are committed partly within and partly outside Kenya, the law exchange for lesser penalties? grants Kenyan authorities the right to prosecute suspected offenders resi- dent within Kenya as if the offence was committed wholly within Kenya. Yes. The law provides that a special magistrate may pardon any person This provision is echoed in the African Convention, which also proscribes supposed to have been directly or indirectly concerned in or privy to an for enactment of legislation to deal with bribery in the private sector, in offence, with a view to obtaining evidence. This pardon is given on condi- which foreign companies would be included. tion that a full and true disclosure is made of the whole circumstance within his knowledge relating to the offence and to every other person concerned, 15 Sanctions whether as principal or abettor. Such a person would be protected under What are the sanctions for individuals and companies violating the Constitution and would not thereafter be tried for the same offence. the foreign bribery rules? The law also allows the EACC, in any matter where it is mandated to institute civil proceedings or applications, to issue a notice or letter of The law provides that a convicted party is liable to anyone who suffers loss demand to the person intended to be sued informing them about the claim as a result of the crime for an amount that would be full compensation for against them and further informing them that they could settle the claim the loss suffered. He is also liable for the value of any benefits received in within a specified time before the filing of court proceedings. The EACC contravention of the law to the agent’s principal. may negotiate and enter into a settlement with any person against whom In public disposal and procurement, an offence by an individual invites the Commission intends to bring, or has actually brought, a civil claim or a maximum fine of 4 million Kenyan shillings or a 10-year term of impris- application in court. onment, or both. A body corporate invites a maximum fine of 10 million It may tender an undertaking in writing not to institute criminal pro- Kenyan shillings. The PPDA provides that a public officer would also be ceedings against a person who: disqualified from public office and a private individual would be debarred. • has given a full and true disclosure of all material facts relating to past The ACEC provides a maximum fine of 1 million Kenyan shillings or corrupt conduct and economic crime by himself or others; 10 years’ imprisonment, or both. An additional mandatory fine is imposed • has voluntarily paid, deposited or refunded all property he acquired where a person has received a quantifiable benefit or caused a quantifiable through corruption or economic crime; and loss. The fine is calculated as twice the amount of the benefit or loss. Where
118 Getting the Deal Through – Anti-Corruption Regulation 2015 Mboya Wangong’u & Waiyaki Advocates KENYA both a benefit and loss have been occasioned, the fine is twice the sum of properly audited. The law also requires that insurance companies have the benefit and loss occasioned. their account audited annually by an auditor. The ACEC provides that where no other statute has made provision, a The Capital Markets (Securities) (Public Offers, Listing and public officer would be suspended from the day of his being charged with Disclosures) Regulations require listed companies to prepare complete a corruption offence and would only be entitled to half pay. Upon convic- financial statements, including a balance sheet, an income statement, a tion, the officer would be dismissed and would be disqualified from public statement showing changes in equity, a cash flow statement, accounting office for 10 years. policies and explanatory notes. The Proceeds of Crime Act provides for several sanctions, but the The UN Convention obligates state parties to take civil and adminis- main ones are: trative measures as may be necessary, in accordance with the fundamental • in the case of a natural person, to imprisonment for a term not exceed- principles of its domestic law, to preserve the integrity of accounting books, ing 14 years, or a fine not exceeding 5 million Kenyan shillings or the records, financial statements or other documents related to public expend- amount of the value of the property involved in the offence, whichever iture and revenue and to prevent the falsification of such documents. is the higher, or to both the fine and imprisonment; and The Central Bank of Kenya Act also allows the Central Bank to order • in the case of a body corporate, to a fine not exceeding 25 million specified banks and financial institutions to furnish to the Central Bank Kenyan shillings, or the amount of the value of the property involved any information and data the bank may reasonably require for the proper in the offence, whichever is the higher. discharge of its functions.
16 Recent decisions and investigations 18 Disclosure of violations or irregularities Identify and summarise recent landmark decisions or To what extent must companies disclose violations of anti- investigations involving foreign bribery. bribery laws or associated accounting irregularities?
Purchase of foreign embassies The law requires companies to keep such books of account as are neces- The Minister for Foreign Affairs and his permanent secretary resigned over sary to give a true and fair view of the state of the companies’ affairs and corruption allegations relating to his decision to refuse an offer of land to explain its transactions. In addition, Kenyan accountants and auditors from the Japanese government in central Tokyo for a new embassy, opting subscribe to the use of International Financial Reporting Standards. These instead to pay €13.6 million for a building further away, against the advice are applicable as a matter of custom and require uniformity of reporting of an estate agency. Further allegations involve questionable land or build- methods, authentication of entries and proper record keeping. The net ing transactions made by his ministry in Brussels, Islamabad and Lagos. effect is that perpetrators of corruption in an organisation have to work more intensively in order to cover up the real nature of any corrupt transac- Money-laundering tion. The requirement for the board of the company to approve the audited A member of parliament and former Minister of Energy and the former accounts and to table them before the shareholders ensures that there is a managing director of a state corporation were both wanted by the Jersey check mechanism in place, which ideally can identify irregularities includ- authorities to answer to charges relating to money-laundering up to an ing those emanating from corrupt practices. Directors are personally liable amount of 900 million Kenyan shillings. They were accused of receiving for accuracy of financial statements presented to shareholders. bribes from international companies between 1999 and 2002. However, The Proceeds of Crime Act also makes it an offence for a person to fail they went to court to challenge both the legality of their extradition as to report suspicion regarding proceeds of crime. ‘Person’ in the act refers to sought by Jersey, and the validity of the charges levelled against them. The both natural and legal persons. cases are still pending in the local courts. 19 Prosecution under financial record keeping legislation Financial record keeping Are such laws used to prosecute domestic or foreign bribery? 17 Laws and regulations It is not common for bribery as an offence to be prosecuted under financial What legal rules require accurate corporate books and records, or accounting legislation in Kenya. This is because in terms of address- effective internal company controls, periodic financial ing corrupt practices, financial record keeping law is not well developed. However, the Proceeds of Crime Act provides for the sharing of informa- statements or external auditing? tion relating to proceeds of crime with institutions similar to the Financial The Constitution provides that parliament shall enact legislation to pro- Reporting Centre. This may provide leeway for the prosecution of both vide for the keeping of financial records and the auditing of accounts of all domestic and foreign persons accused of bribery. governments and other public entities and prescribe measures for securing Further, to the extent that a company fails to keep proper books of efficient and transparent fiscal management. This is to be done within four account, financial record keeping law may be used to prosecute the directors. years. The companies act makes it an offence for any director to fail to take reason- The Companies Act requires proper books of account to be kept, able steps to comply with the Act’s provisions on record/book keeping. which should be open to the inspection of directors. These should be able The UN Convention provides that state parties must adopt legislative to disclose the financial position of the company at intervals of six months. and other measures as necessary to establish a criminal offence involving Within 18 months of the incorporation of a company, and annually there- foreign bribery. after, financial statements are required to be laid before the company at a general meeting. The directors are personally liable for keeping of proper 20 Sanctions for accounting violations records and a breach of this duty may lead to fines, imprisonment or both. What are the sanctions for violations of the accounting rules It also requires every company to appoint an auditor. If a vacancy arises associated with the payment of bribes? and is not filled by the company, the registrar of companies is permitted to appoint an auditor for the company. The Companies Act provides sanctions for non-disclosure, which are The Banking Act requires banks and financial institutions to submit meted out against directors personally. They include a maximum fine of to the Central Bank of Kenya (CBK), not later than three months after the 10,000 Kenyan shillings and a maximum jail term of 12 months. expiry of its financial year, an audited balance sheet showing its assets and The Penal Code also prescribes a punishment of three years’ impris- liabilities in Kenya and a profit and loss account covering its activities in onment for submitting false documents generally. This would be applica- Kenya together with a copy of the auditor’s report. It also requires that a ble in instances where the financial records give a true and fair view of the bank or financial institution appoint an auditor who is qualified under the company’s financial position but are false in the provisions of their particu- Companies Act and approved by the CBK annually. lars. A conviction for falsifying official documents has a mandatory prison The Insurance Act also requires an insurance company to keep such sentence of seven years. The Penal Code does not limit the sanctions to the accounting records in order to correctly record and explain the trans- directors, and therefore may be used to prosecute other officials such as the actions and financial position of the insurance company, to enable the company secretary and accountant. accounts, reports and statements required under the act to be prepared, The Proceeds of Crime Act makes it an offence for a person to know- and to enable those accounts and statements to be conveniently and ingly make a false, fictitious or fraudulent statement, or to make, or www.gettingthedealthrough.com 119 KENYA Mboya Wangong’u & Waiyaki Advocates provide, any false document, knowing the same to contain any false, fic- From the above section, it is implied that ‘public official’ includes titious or fraudulent statement or entry, to a reporting institution, or to a employees of state-owned or state-controlled companies. supervisory body or to the regulator under the act. 25 Public official participation in commercial activities 21 Tax-deductibility of domestic or foreign bribes Can a public official participate in commercial activities while Do your country’s tax laws prohibit the deductibility of serving as a public official? domestic or foreign bribes? This will depend on whether his or her participation in commercial activi- Kenyan law only allows the deduction, as expenses, of amounts incurred in ties conflicts with his or her official duties. Section 12(1) of the POE, provides the generation of income. Bribes, therefore, do not qualify as a deductible that ‘a public officer shall use his best efforts to avoid being in a position in expense for taxation purposes. which his personal interests conflict with his official duties’. Subsection 2 of section 12 further provides that ‘without limiting the generality of subsec- Domestic bribery tion (1), a public officer shall not hold shares or have any other interest in a corporation, partnership of other body, directly or through another person, 22 Legal framework if holding those shares or having that interest would result in the public Describe the individual elements of the law prohibiting bribery officer’s personal interests conflicting with his official duties’. of a domestic public official. The Constitution limits involvement in commercial activities as it pro- vides that state officers must behave in a manner that avoids any conflict The Constitution of Kenya, 2010 outlines the principles of leadership with between personal interests and public or official duties or in a manner that integrity at the core. The Constitution also outlines values and principles of compromises any official or public duties in favour of personal interests. public service, which include accountability and transparency. • The ACEC – this is the main statute dealing with all corruption matters 26 Travel and entertainment and provides for the prevention, investigation and punishment of cor- ruption, economic crimes and related offences; Describe any restrictions on providing domestic officials with • the POE – provides for ethical practices and conduct of public officers; gifts, travel expenses, meals or entertainment. Do the restrictions • the Penal Code – deals with bribery under the offence of abuse of apply to both the providing and receiving of such benefits? office; The law makes it an offence to give to an ‘agent’ or as an agent to receive • the Public Procurement and Disposal Act – prohibits corrupt practices any benefit which would tend to influence favour or disfavour. The offence that include bribery; is extended to include soliciting for these benefits as well as agreeing to • the UN Convention requires state parties to enact legislation prohib- give or receive such benefits. A benefit means any gift, loan, fee, reward, iting bribery and to periodically evaluate relevant legal instruments appointment, service, favour, forbearance, promise or other consideration with a view to determining their adequacy in fighting corruption; and or advantage. • the Proceeds of Crime Act – introduces measures for combating the The Constitution also provides that a state officer shall behave, transmission and use of proceeds of crime and provides for the identi- whether in public and official life, in private life, or in association with other fication, tracing, freezing, seizure and confiscation of the proceeds of persons, in a manner that avoid any conflict between personal interests crime, and for connected purposes; and and public or official duties. The Penal Code also makes it an offence for a person, who being 23 Prohibitions employed in the public service and being in a position to furnish returns Does the law prohibit both the paying and receiving of a bribe? or statements relating to money payable to him or to any other person, to make a return or statement which to his knowledge is false in any material Yes it does. The ACEC deals with bribery involving agents. It provides that particular. This includes gifts. a person is guilty of an offence if the person corruptlyreceives or solicits, or agrees to receive or solicit, a benefit, or gives or offers, or agrees to 27 Gifts and gratuities give or offer, a benefit. The Proceeds of Crime Act has a wide definition of ‘proceeds of crime’ Are certain types of gifts and gratuities permissible under your that includes acquiring, using and holding property or economic advan- domestic bribery laws and, if so, what types? tage derived from or realised as a result of or in connection with an offence. It is evident that both paying and receiving a bribe is prohibited under There are certain types of gifts and gratuities that are permissible under the laws of Kenya. Kenyan laws. The constitution provides that a gift or donation to a state officer on a 24 Public officials public or official occasion is a gift or donation to the republic and shall be delivered to the state unless exempted under an act of parliament. How does your law define a public official and does that The POE states that a public officer may only accept a gift if it is a non- definition include employees of state-owned or monetary gift that does not exceed the value prescribed by regulation. The state-controlled companies? prescribed value is currently 20,000 Kenyan shillings. A public officer may also accept a gift from a relative or friend given on a special occasion rec- The Constitution defines ‘public officer’ as any state officer, or any person, ognised by custom. other than a state officer, who holds a public office. A public office is an office in the national government or the county government or the public 28 Private commercial bribery service, the remuneration and benefits of which are payable directly from the Consolidated Fund or directly out of monies provided by parliament. Does your country also prohibit private commercial bribery? The ACEC defines a ‘public officer’ as an officer, employee or- mem Yes it does. The definitions given in law do not distinguish between private ber of a public body, including one that is unpaid, part-time or temporary. and public entities. Kenyan law generally prohibits corrupt practice. Public body refers to the government, including the cabinet, or any depart- The object of the ACEC is to provide for the prevention, investigation ment, service or undertaking of the government; the National Assembly and punishment of corruption, economic crime and related offences and or the Parliamentary Service; a local authority; any corporation, council, incidental matters. The ACEC prohibits bribery involving agents. Section board, committee or other body that has power to act under and for the 38 defines an agent as a person who, in any capacity, and whether in the purposes of any written law relating to local government, public health or public or private sector, is employed by or acts for or on behalf of another undertakings of public utility or otherwise to administer funds belonging person. to or granted by the government or money raised by rates, taxes or charges In practice, however, there has been a tendency to apply the act more in pursuance of any such law; or a corporation, the whole or a controlling stringently to public officers. The African Charter, however, urges state majority of the shares of which are owned by a person or entity that is a parties to enact legislation to deal with corruption in the private sector. public body by virtue of any of the preceding paragraphs of this definition. The definition in the UN Convention includes any person who per- forms a public function, including for a public agency or public enterprise.
120 Getting the Deal Through – Anti-Corruption Regulation 2015 Mboya Wangong’u & Waiyaki Advocates KENYA
29 Penalties and enforcement What are the sanctions for individuals and companies violating Update and trends the domestic bribery rules? A number of high-profile corruption cases involving land in Kenya have been highlighted by the media as property prices in the country The Penal Code provides a sanction in the form of a fine not exceeding continue to escalate in value with large tracts of undeveloped land 1 million shillings or to imprisonment for a term not exceeding 10 years, located in strategic areas being targeted by corrupt individuals and or both. companies. Some of the more recent key cases involve land in the The ACEC provides that a person convicted of an offence shall be Nairobi upmarket area of Karen as well as coastal prime property in liable to: Lamu. • a fine not exceeding 1 million Kenyan shillings, imprisonment for a In order to further streamline the tendering process in public term not exceeding 10 years, or both; and institutions, the Public Procurement and Disposal Regulations were • an additional mandatory fine if, as a result of the conduct that con- amended in 2014. stituted the offence, the person received a quantifiable benefit or any other person suffered a quantifiable loss. One such case is an allegation that officials of IEBC, Kenya’s electoral The Proceeds of Crime Act provides for several sanctions, but the main management body, and KNEC, Kenya’s national examinations manage- ones are: ment body, received such ‘chicken’ from Smith & Ouzman, a UK printing • in the case of a natural person, to imprisonment for a term not exceed- firm, to secure tenders for printing of ballot papers and examination cer- ing 14 years, or a fine not exceeding 5 million Kenyan shillings or the tificates respectively. amount of the value of the property involved in the offence, whichever The case against the UK firm is going on in the UK and the SFO has is the higher, or to both the fine and imprisonment; and asked for assistance in the investigations from the Kenyan government. • in the case of a body corporate, to a fine not exceeding 25 million Kenyan shillings, or the amount of the value of the property involved The Karen Land grabbing in the offence, whichever is the higher. It is alleged that some powerful Kenyan government officials and shrewd businessmen grabbed a substantially large piece of land in one of Nairobi’s 30 Facilitating payments premier suburbs, Karen, from a private developer. A civil case is pending in Have the domestic bribery laws been enforced with respect to the Kenyan High Court, to determine the legal ownership of the property. facilitating or ‘grease’ payments? It is also expected that criminal investigations and prosecutions for fraud and forgery will take place. Domestic bribery laws in Kenya do not expressly define facilitating or grease payments but these are prohibited by inference. In particular the Lamu Land saga ACEC provides that corruption includes bribery, fraud, embezzlement or Some companies (allegedly owned and controlled by powerfully placed misappropriation of public funds, abuse of office, and breach of trust or officials and businessmen) illegally acquired huge chunks of real estate an offence involving dishonesty in connection with any tax, rate or impost in the coastal county of Lamu and irregularly procured titles thereto. The levied under any act. National Land Commission, Kenya’s custodian of public land, investigated Facilitation payments are a common feature in public offices and in the matter and cancelled many of the titles. certain professions that regularly interact with public officials. Bribery of these officials by ordinary citizens and even these professionals is common The Anglo Leasing scandal due to the desire for efficient services. These are, however, being phased After over a decade of chasing shadows, the anti-graft agency has recom- out as stronger controls are put in. mended the prosecution of 10 people for involvement in the multi-billion The Constitution prohibits behaviour that indicates potential conflict shilling Anglo Leasing contracts scam. The Ethics and Anti-Corruption between personal interests and public or official duties; or that demeans Commission chairman, Mumo Matemu, in October 2014, announced the the office that an officer in the public service holds. suspects were both Kenyans and foreigners, but declined to name them. Besides, the POE says that monetary gifts to a public officer are Matemu said his office sent the files with the recommendations to the Office deemed to be gifts to the organisation for which the officer works. of the Director of Public Prosecutions the morning before.
31 Recent decisions and investigations Identify and summarise recent landmark decisions and investigations involving domestic bribery laws, including any investigations or decisions involving foreign companies.
The IEBC/KNEC bribery scandal The UK Serious Fraud Office (SFO) has been investigating various allega- tions of British firms dishing out bribes codenamed ‘chicken’ to Kenyan officials to secure procurement deals.
Godwin Wangong’u [email protected] CG Mbugua [email protected]
Maji Mazuri Rd Tel: +254 20 2160 312 / 313 PO Box 74041 – 00200, Nairobi Fax: +254 20 434 8361 Kenya www.lexgroupafrica.com
www.gettingthedealthrough.com 121 KOREA Kim & Chang
Korea
Kyungsun Kyle Choi and Liz Kyo-Hwa Chung Kim & Chang
1 International anti-corruption conventions 4 Definition of a foreign public official To which international anti-corruption conventions is your How does your law define a foreign public official? country a signatory? Article 2 of the FBPA defines a foreign public official in a way that is similar Korea has signed and ratified the OECD Convention on Combating Bribery to the OECD Convention, encompassing not only government officials but of Foreign Public Officials in International Business Transactions (OECD also individuals performing a public function (eg, employees in public agen- Convention) and the UN Convention against Corruption. cies, international organisations and government controlled companies).
2 Foreign and domestic bribery laws 5 Travel and entertainment restrictions Identify and describe your national laws and regulations To what extent do your anti-bribery laws restrict providing prohibiting bribery of foreign public officials (foreign bribery foreign officials with gifts, travel expenses, meals or laws) and domestic public officials (domestic bribery laws). entertainment? The rules governing bribery of domestic government officials are stipu- The FBPA prohibits providing a bribe to a foreign official when the elements lated in the following laws and regulations: of article 3.1 are satisfied. A ‘bribe’ under the FBPA includes ‘any undue • the Korean Criminal Code; advantage’ which refers to money, goods and includes almost everything • the Act Concerning Aggravated Punishment of Specific Crimes that the official demands or desires. As there is no specific exception regard- (Specific Crimes Act); ing gifts or entertainment under the FBPA, whether a gift is criminally • the Act on the Creation and Operation of the Anti-Corruption and punishable will depend on the amount of the gift or entertainment and the Civil Rights Commission and the Prevention of Corruption (Anti- specific facts of each case. Corruption Act); • the Public Officials’ Code of Conduct for Maintenance of Integrity 6 Facilitating payments (Code of Conduct); and Do the laws and regulations permit facilitating or ‘grease’ • other administrative laws and regulations. payments?
As for bribery of foreign public officials, Korea has enacted the Foreign The FBPA was amended on 15 October 2014 to eliminate the facilitation Bribery Prevention in International Business Transactions Act (FBPA) payment exception. Thus, facilitation payments are no longer permitted pursuant to the OECD Convention, which has similarities to the Foreign under the FBPA. Corrupt Practices Act in the United States. 7 Payments through intermediaries or third parties Foreign bribery In what circumstances do the laws prohibit payments through 3 Legal framework intermediaries or third parties to foreign public officials? Describe the elements of the law prohibiting bribery of a The FBPA itself does not contain specific regulations concerning payments foreign public official. through intermediaries. However, in precedents involving domestic public officials, courts have held that payments provided to third parties may be In Korea, the main law governing bribery of foreign public officials is a criminal offense if the relationship between the third party and the pub- the FBPA which entered into force in 1999. Under the FBPA, any Korean lic official is such that the public official may be deemed to have directly national who intentionally engages in the bribery of a foreign public offi- received the payment, for example in case where the third party is an agent cial in order to obtain improper advantages will be subject to criminal of the public official. Additionally, the Korean Supreme Court has ruled that punishment. Moreover, any foreign nationals engaged in the bribery of a the defendant committed bribery when he provided payments to a com- foreign public official within Korea are also subject to punishment under pany where the public official was the de facto manager. In light of these the FBPA under territoriality principles. precedents, payment through intermediaries or third parties to foreign pub- Under article 3.1 of the FBPA, a violation of the FBPA will be found if lic officials, albeit indirectly, is prohibited under the same circumstances. the following elements are satisfied: any person intentionally promising, giving or offering a bribe (money, goods and other pecuniary advantages 8 Individual and corporate liability as well as intangible benefits that satisfy the demands or the wishes of a person) to a foreign public official in connection with the performance of Can both individuals and companies be held liable for bribery his or her official duties in order to obtain an improper advantage in an of a foreign official? international business transaction. Yes. Individuals as well as legal entities can be held liable under the FBPA. A However, even if the elements above are satisfied, article 3.2 of the legal entity may be held liable for bribery of a foreign official when a repre- FBPA provides an exception if the law of the foreign public official’s coun- sentative, agent, employee or other individual working for such legal entity try permits or requires such payment. has committed the foreign bribery offence in connection to its business. Article 4 of the FBPA, however, does not enforce strict liability if the legal entity has ‘afforded due attention or exercised proper supervision to prevent the offence’. The corporation or other legal entity may be exempt
122 Getting the Deal Through – Anti-Corruption Regulation 2015 Kim & Chang KOREA from punishment if it proves that it has taken measures to prevent such to five years or a fine of up to twice the amount of the profit. Whenever an FBPA violations by its representatives, agents or employees. individual becomes subject to imprisonment, a fine will be imposed as well. Legal entities are liable to pay a fine of up to 1 billion won in addition 9 Civil and criminal enforcement to the imposition of penalties on the actual offender. If the profits that were Is there civil and criminal enforcement of your country’s obtained through the offence exceed a total of 500 million won, the legal entity can be subject to a fine of up to twice the amount of the total profit. foreign bribery laws? The imposition of penalties on the actual offender is not a prerequisite for The FBPA only contains criminal penalties but a convicted party may be imposing a fine on the company. held liable additionally for civil damages under a lawsuit initiated by a party whose rights were infringed (ie, competitors, customers, business partners, 16 Recent decisions and investigations etc) pursuant to tort law. Identify and summarise recent landmark decisions or investigations involving foreign bribery. 10 Agency enforcement What government agencies enforce the foreign bribery laws In May 2011, the Incheon District Prosecutor’s Office indicted the general manager and the representative directors of a domestic logistics com- and regulations? pany and a travel agency for offering a bribe to the general manager of a The FBPA is enforced by the police and the prosecutor’s office. A Korean Korean branch office of a Chinese airline, in violation of the FBPA. The court has final authority in determining the amount of fine or the length accused individuals were charged with providing and taking bribes total- of imprisonment. ling approximately 6.7 billion won. The Incheon District Court ruled on 14 February 2012 that the general 11 Leniency manager of a Korean branch office of a Chinese airline was not a ‘foreign public official’ for the purpose of the FBPA (Case No. 2011 Gohab 277, 294, Is there a mechanism for companies to disclose violations in 757). The ruling was based on the judgment that there was insufficient exchange for lesser penalties? evidence to prove that the airline was conducting business on an unequal There is no explicit mechanism for companies to disclose violations in footing with private companies and, hence, it could not be evaluated as a exchange for reduced penalties. As noted in question 8, however, the Chinese state-owned enterprise (SOE). Instead, the court found the gen- corporation or other legal entity may be fully or partially exempt from eral manager and representatives guilty of commercial bribery. Further, punishment if it proves that it has taken measures to prevent such FBPA as a result of guilty verdicts in connection with other charges relating to violations by its representatives, agents or employees. embezzlement and document forgery, the general manager was given a six-year prison term and ordered to disgorge profits equivalent to the 12 Dispute resolution amount of the bribes received. The Incheon District Prosecutor’s Office has appealed against the Can enforcement matters be resolved through plea Incheon District Court’s decision on several grounds, including the ‘foreign agreements, settlement agreements, prosecutorial discretion public official’ issue. On 1 February 2013, however, the Seoul High Court or similar means without a trial? upheld the decision of the Incheon District Court, maintaining that there is FBPA enforcement matters are not resolved through plea agreements or insufficient evidence to prove that the airline branch is a Chinese SOE. The settlement agreements. However, as in any other case, the public prosecu- prosecution did not appeal the High Court’s decision to the Supreme Court tor possesses a certain amount of discretionary powers to decide whether (Case No. 2012 No 865, 2012 No 2685). to proceed with prosecution depending on the specific circumstances of the case. Financial record keeping 17 Laws and regulations 13 Patterns in enforcement What legal rules require accurate corporate books and records, Describe any recent shifts in the patterns of enforcement of the effective internal company controls, periodic financial foreign bribery rules. statements or external auditing? Since the enactment of the FBPA, there have only been a small number Pursuant to the External Audit of Joint-Stock Company Law, listed com- of convictions for foreign bribery in Korea, mostly with respect to US panies and all unlisted joint-stock companies with 12 billion won or more army projects in Korea. Although the Korean Prosecutor’s Office recently (the threshold varies depending on the amount of liability and number of indicted individuals under the FBPA for bribery of an officer of a Chinese employees) in assets at the end of the latest fiscal year are required to be state-owned company, the court found that the officer was not a ‘foreign audited by an external auditor on an annual basis and required to prepare public official’ for the purpose of the FBPA and ruled that the defendants and keep corporate books with effective internal controls in accordance with committed commercial bribery instead (see question 16). Therefore it is Korean GAAP. Additionally, the Korean Commercial Code requires a com- not yet possible to determine any clear patterns of enforcement. pany to prepare an account book and a balance sheet on an annual basis and keep corporate books including important documents related to the busi- 14 Prosecution of foreign companies ness for 10 years. On 28 October 2013 the Financial Services Commission In what circumstances can foreign companies be prosecuted announced its plan to expand the application of the External Audit of Joint- for foreign bribery? Stock Company Law to limited companies meeting the same minimum size threshold as unlisted joint-stock companies. According to the plan, a limited Foreign companies operating in Korea can be held liable for the behaviour company meeting the threshold will be subject to an audit by an external of their employees, agents and representatives under the FBPA (see ques- auditor and required to prepare and keep corporate books with effective tion 3). There are no thresholds as to size or legal form of the entity, so that internal controls in accordance with Korean GAAP. Further, on 10 October any legal person acknowledged under the law including associations, foun- 2014, the Financial Services Commission issued a Legislation Notice of dations, joint-stock corporations, limited liability companies, unlimited or an amendment to the External Audit of Joint-Stock Company Law, which limited partnerships, etc, may potentially come under the reach of the FBPA. would subject limited companies meeting a certain threshold to compulsory external audit, as well as introducing the turnover of a company as another 15 Sanctions threshold for determining companies subject to external audit. What are the sanctions for individuals and companies violating the foreign bribery rules? 18 Disclosure of violations or irregularities Individuals may be subject to imprisonment for up to five years or a fine of To what extent must companies disclose violations of anti- up to 20 million won. If the profit obtained through the offence exceeds a bribery laws or associated accounting irregularities? total of 10 million won, the individual can be subject to imprisonment of up There is no general obligation in the Korean anti-bribery laws to report violations of anti-bribery laws. However, in case of financial institutions www.gettingthedealthrough.com 123 KOREA Kim & Chang such as banks and securities companies, if the head of the financial insti- purpose of the benefit; whether there is a pre-existing personal relation- tution discovers that a director, officer or an employee has committed ship between the recipient and the giver; the circumstances of the benefits a crime under the Aggravated Punishment of Specific Economic Crimes conferred, including the frequency, timing and amount or value of the gift Act (Specific Economic Crimes Act), he or she has the obligation to report or benefit; and whether the benefits caused the recipient to carry out his such matter to the relevant authorities. The Specific Economic Crimes Act official duties in a way that would lead the general public to question the punishes both giving and receiving of bribes with respect to employees of propriety of his actions. financial institutions. A company subject to the external audit requirement above is also 23 Prohibitions subject to the requirement that an audit report prepared by an external Does the law prohibit both the paying and receiving of a bribe? auditor be submitted to the Financial Supervisory Commission and the Korean Stock Exchange under the Capital Market Consolidation Act. The Yes. Articles 129 and 133 of the Criminal Code prohibit both the offering of audit report should disclose information on any events that may have a bribes to public officials and taking of bribes by public officials in connec- significant impact on the company. These events would be disclosed in tion with the public officials’ duties, and impose punishment on the giver as the financial statements (ie, balance sheet and profit and loss statement) well as the taker of such bribes. as a loss or gain (or a liability or asset, or both) or in the footnote thereof as a ‘contingent’ liability or asset. The loss of a company that may result from 24 Public officials being found guilty of foreign official bribery, if significant, is likely to be How does your law define a public official and does that recognised as a contingent liability provided that the amount of such liabil- definition include employees of state-owned or state- ity cannot be measured with sufficient reliability. The audit report must be controlled companies? submitted once per year after the annual financial statements have been prepared. This audit requirement does not require the company to disclose Public officials who are employed by both state and local government are any such event as and when they occur. primarily defined by the State Public Officials Act and the Local Public An event or omission may be considered to have a ‘significant impact’ Officials Act. However, when it comes to bribery, many statutes include or be considered ‘material’ from an auditing point of view if such event provisions under which certain employees of state-owned or state-con- could influence the economic decisions of those that make such decisions trolled companies are deemed to be public officials, thereby subjecting by relying on the financial statements of the company. them to bribery provisions under the Criminal Code. For example, a per- son is deemed to be a public official if he or she is a senior staff employee 19 Prosecution under financial record keeping legislation of a government corporation meeting the requirements provided in arti- Are such laws used to prosecute domestic or foreign bribery? cle 4 of the Specific Crimes Act. An exhaustive list under the Presidential Enforcement Decree to the Specific Crimes Act specifically identifies the The above-mentioned laws (other than the Specific Economic Crimes Act) Bank of Korea and the Financial Supervisory Service, in addition to 44 other are not used to prosecute domestic or foreign bribery. entities, as organisations that qualify as government-controlled entities. Additionally, pursuant to the Public Organisation Management Act, the 20 Sanctions for accounting violations state government issues a list of public corporations and quasi-government What are the sanctions for violations of the accounting rules entities, the employees of which are deemed to be government officers associated with the payment of bribes? under the Criminal Code with respect to the charge of bribery.
The External Audit of Joint-Stock Company Law states that violations of 25 Public official participation in commercial activities several of the provisions may subject a violator to up to five years’ impris- Can a public official participate in commercial activities while onment or a fine of up to 50 million won, whereas the Capital Markets serving as a public official? Consolidation Act provides for imprisonment of up to five years or a fine of up to 200 million won. According to the Korean Commercial Code, a According to both the State Public Officials Act and the Local Public violation can result in a fine of up to 5 million won. Officials Act, public officials of the state and local governments shall not engage in profit-making activities other than public affairs and shall not 21 Tax-deductibility of domestic or foreign bribes hold any other jobs without approval by the head of the institution to Do your country’s tax laws prohibit the deductibility of which he belongs. Meanwhile, the Official Duties of Public Officials of the domestic or foreign bribes? National Assembly forbids officials from engaging in activities that may obstruct the efficiency of their services, wrongfully influence public affairs, In Korea, the Corporate Income Tax Law and the Individual Income Tax give such officials benefits contrary to the interest of the state or affect Law prohibit the deductibility of domestic and foreign bribes. the government in a dishonourable manner. Lastly, the Code of Conduct, the Code of Conduct for Judges and Court Officials, the Code of Conduct Domestic bribery for Constitutional Court Officials and the Code of Conduct for Election Committee Officials require that public officials report to the head of the 22 Legal framework institution to which they belong regarding any lecture stipends, exposi- Describe the individual elements of the law prohibiting bribery tions, presentations or discussions they conduct outside the institution. of a domestic public official. 26 Travel and entertainment Pursuant to articles 129 and 133 of the Criminal Code, the Specific Crimes Act and court precedent, to establish a charge of bribery of a public official Describe any restrictions on providing domestic officials (official bribery), prosecutors need to show that an economic benefit has with gifts, travel expenses, meals or entertainment. Do the been given to a public official in connection with his or her official duties restrictions apply to both the providing and receiving of and the benefits go beyond the boundaries of what is usually given as a mat- such benefits? ter of custom or social courtesy. ‘Economic benefit’ is broadly interpreted to encompass anything of value including entertainment, a gift of cash or According to the Criminal Code and the Specific Crimes Act, any type goods, or even an invitation to a round of golf. A ‘public official’ includes of economic benefit that is provided to or received by a domestic official a ‘deemed public official’ who is a senior staff employee of a government in connection with his or her duties is prohibited (unless the benefits are corporation meeting the requirements provided in article 4 of the Specific within the boundaries of what is usually given as a matter of social norm). Crimes Act or an employee of a public corporation or quasi-government In such case, both the giver and the taker are punished. entity (see question 24). In addition, the Code of Conduct was enacted and took effect on 19 The Korean courts have developed a ‘social courtesy’ exception, and May 2003 in the form of a Presidential Decree to the Anti-Corruption Act determine whether an act constitutes bribery by taking into account the to provide general guidelines with respect to, among other things, giving ‘totality of the circumstances’ including, but not limited to, the follow- gifts to and entertaining public officials. The Code of Conduct prohib- ing factors set forth by the Supreme Court: the scope and nature of the its a public official from receiving any cash, gifts or other entertainment recipient’s duties; the relevance of the recipient’s duties to the giver; the from anyone who has an interest in the performance of the official duties
124 Getting the Deal Through – Anti-Corruption Regulation 2015 Kim & Chang KOREA of the official, with a few exceptions that are briefly explained in question 30 Facilitating payments 27. A violation of the Code of Conduct does not necessarily mean that it Have the domestic bribery laws been enforced with respect to is a violation of bribery laws. Therefore, in case of a violation of the Code facilitating or ‘grease’ payments? of Conduct, unless gifts or entertainment are determined to constitute bribery in violation of the Criminal Code or the Specific Crimes Act, only Domestic bribery laws do not provide for any ‘facilitation payment’ excep- the public official at the receiving end is subject to disciplinary measures tion. The laws regarding bribery of public officials have been enforced with under the Code of Conduct. respect to relatively small amounts of money because a violation can be found simply if the payment is made ‘in connection with the duties’ of the 27 Gifts and gratuities public official. Are certain types of gifts and gratuities permissible under your 31 Recent decisions and investigations domestic bribery laws and, if so, what types? Identify and summarise recent landmark decisions and It cannot be said that certain types of gifts and gratuities are permissible investigations involving domestic bribery laws, including any under Korean law because any gift, no matter how small, could constitute a investigations or decisions involving foreign companies. bribe depending upon the context in which it is given. With respect to gov- ernment officials, however, the Code of Conduct sets forth certain excep- The Supreme Court ruled on 21 January 2000 (Case No. 99 Do 4940) that tions that would allow government officials to receive certain gifts and payments of 1 million won by a medical supplies wholesaler to a public gratuities in certain circumstances and under certain conditions. These official of the Korea Veterans Hospital on each of the three major Korean exceptions include, for example, ‘food or conveniences provided within holidays over the course of four years (for a total of 13 million won) was pun- the extent of normal practices’. However, these exceptions do not provide ishable as a bribe. In return, the wholesaler received certain benefits in the an automatic ‘safe harbour’, but merely allow a possible defence against delivery of medicine, as well as notification of bidding rates and information bribery charges. related thereto. Even though the wholesaler did not ask for any explicit or specific favours each time, the money was meant to ensure that the whole- 28 Private commercial bribery saler was given preferential treatment in delivery transactions. This case is Does your country also prohibit private commercial bribery? significant because it shows that the Korean courts will aggregate gifts given over a long period of time in determining if bribery was committed. Article 357 of the Criminal Code prohibits giving economic benefits to a The Supreme Court also ruled on 29 September 2005 (Case No. 2005 person who is entrusted with conducting the business of another person if Do 4411) that a benefit given by a foreign bank to an official of a public cor- such benefits are related to an improper request made in connection with poration in small amounts to cover golf expenses such as 325,000 won and the duties of the person in question. This essentially concerns the bribery 267,000 won throughout a period of one year amounting to a total of 1.916 of private sector employees. million won, in return for favours related to financial derivative transac- The difference between the elements of commercial bribery and those tions, constitutes a bribe. The decision required that various factors be con- of official bribery is that, in principle, commercial bribery requires that an sidered, including the nature of the public official’s work, the relationship improper request be made (eg, a request to award a bid in exchange for between the work and the benefit-giver, the existence of a private relation- cash), whereas an improper request is not a necessary element of official ship between the parties, the size of the benefits, and the context and timing bribery. For official bribery, as long as the economic benefits are connected of the benefits in determining whether a bribe had taken place. This case is to the public official’s duties, providing benefits to an official could be- con significant because it demonstrates that although the overall amount is not sidered bribery even if no improper request is made. In practice, however, large, as long as it was provided ‘in connection with’ the duties of a public prosecutors have tended to gloss over the requirement that an improper official, then bribery can be found to exist. request be made in commercial bribery cases, and the courts have not been In one of the more recent cases reported in the local media, the vigilant in requiring that the element be satisfied. Supreme Court held that two meals provided by a construction company Articles 5 and 6 of the Specific Economic Crimes Act prohibit offering employee to a local district government official on two different occasions, economic benefits to an officer or an employee of a financial institution in amounting to 18,000 won and 12,000 won, constituted bribery, since these connection with the performance of his or her duties. Similar to the official meals were clearly provided in connection with the duties of the public offi- bribery laws, the Specific Economic Crimes Act explicitly lists the compa- cial in question, as partly shown by the bribe-giver’s failed attempt to also nies, institutions and entities that are considered ‘financial institutions’ provide cash payment of 5 million won. for the purposes of the legislation. The list contains both government- The Code of Conduct for public officials discussed above is a model controlled financial institutions, such as the Korea Development Bank, code that every government agency has adopted as its own. Many individ- and private institutions such as commercial banks, securities companies, ual codes of conduct provide a monetary threshold, such that meals, trans- asset management companies, insurance companies and Korean branches port and telecommunication services provided by an interested party are or subsidiaries of foreign commercial banks. Aside from the requirement specifically limited to 30,000 won, whereas gifts for weddings and funerals that the recipient be an officer or employee at a financial institution, the are limited to 50,000 won. If the value of the gifts given is within these lim- analysis of whether a payment constitutes a bribe is substantially similar to its, one can significantly reduce the risk of a charge of bribery. However, as that under the official and commercial bribery provisions. the recent Supreme Court case illustrates, in addition to the amount of the gift or meals, the context in which the gift is given is a decisive factor. 29 Penalties and enforcement From 2009, the special investigations unit of the Ulsan District What are the sanctions for individuals and companies violating Prosecutors’ Office has investigated corruption involving the nuclear power the domestic bribery rules? plant and its suppliers. The scope of its investigation was expanded to the head office of the Korea Hydro and Nuclear Power (KHNP), regional pro- A giver of a bribe to a government official in violation of the Criminal Code curement departments and employees of the suppliers. In 2012, the Ulsan can face up to five years of imprisonment or a fine of up to 20 million won. District Court found numerous officers of KHNP and the employees of sup- The penalty that would apply to the giver of a bribe to a private sector pliers guilty of official bribery. In one case, the court imposed a sentence employee would be either a fine of up to 5 million won or imprisonment of of 10 years’ imprisonment, a criminal fine of 460 million won as well as up to two years. an administrative fine of 240 million won on one of the KHNP officers for Under the Criminal Code, a public official who receives, solicits or receiving bribes. On the giving side, one employee of the supplier was sen- agrees to a bribe can face imprisonment of up to five years or be disquali- tenced to 18 months’ imprisonment (Case No. 2012 Gohab 144). The Pusan fied for up to 10 years. In case of violations under the Specific Crimes Act High Court later reduced the KHNP officer’s sentence to seven years’ and the Specific Economic Crimes Act, the penalties may be higher since imprisonment and a criminal fine of 230 million won, while maintaining the maximum penalties are set higher than those under the Criminal Code that of the giver (Case No. 2012 No 561). in correlation with the bribery amount. On 27 December 2012, the Constitutional Court found that a private person appointed as a member of a government committee is not a public official for the purpose of official bribery, unless there are any explicit laws stipulating that such person would be deemed a public official. According www.gettingthedealthrough.com 125 KOREA Kim & Chang
Update and trends Governmental Anti-Corruption Task Force Pending new anti-corruption legislation The Anti-Corruption Task Force, first launched in July 2014 under A new anti-corruption legislation, the Act on Prevention of Improper the Office of the Korean Prime Minister, is an inter-agency effort Solicitation and Provision of Economic Benefits (commonly referred comprised of seven governmental bodies: the Prosecutor’s Office, the to as the Kim Young-ran Law, named after the ex-chairperson of Anti-Corruption & Civil Rights Commission, the Korea Fair Trade the Anti-Corruption & Civil Rights Commission who proposed the Commission, the National Tax Service, and the Korea Customs Service. original legislation) is currently pending in the National Assembly. The main task of the Anti-Corruption Task Force is to uncover the The new legislation, which was originally proposed in 2011 to provide corruption of not only government institutions but all fields, especially strengthened regulation on official bribery, came to public attention private sectors linked to government institutions, to analyse causes again in 2014 in the aftermath of the sinking of the ferry Sewol, where of corruption and to propose solutions to the problem. Since its the relationship between the accident and the failure of regulators to foundation, the Anti-Corruption Task Force has uncovered numerous enforce safety requirements was brought to light. The new legislation cases of corruption, including embezzlement and misappropriation of purports to broaden the scope of public officials subject to the new act LED lighting subsidies for public institutions and housing subsidies, and prohibits receipt of any economic benefit irrespective of whether fabrication of test results and supply of inadequate products by fire such benefit is related to the duties of the recipients. Deliberation on the plant parts suppliers, and illegal vehicle additions by freight companies new legislation was yet again postponed at the end of 2014, leaving the (resulting in excessive receipt of fuel subsidies). bill still pending in the new year.
to the decision, it is a violation of the principle of statutory criminal punish- the fairness of the public official in performing his duties. In conclusion, ment if a private person is deemed a public official without any statutory the Supreme Court ruled that: ‘if a public official received money or other grounds (Case No. 2011 Hunba 117). valuables from a person associated with his work, unless there were special In January 2013, the Seoul District Court found a public official of the circumstances showing that such gifts were provided out of a personal rela- Seoul office of the Ministry of Employment and Labour guilty of receiving tionship or friendship, even if such gifts appear to be within the bounds of bribes from companies he was supervising. In this case, in addition to receiv- social custom, the receipt of such gifts may constitute bribery.’ ing cash bribes, the public official had invited employees of companies that The case was remanded to the Seoul High Court, and on 12 June 2014, were under his supervision to his daughter’s wedding and subsequently the Seoul High Court rendered its final decision, which explained in a received congratulatory money from them ranging between 50,000 and relatively detailed manner why it found some instances of cash gifts to 300,000 won. While the Seoul District Court found all congratulatory cash constitute bribery but not others. In making its bribery determination, the gifts to be unlawful bribes irrespective of the amount, the Seoul High Court court examined the specific circumstances under which the cash gifts were on appeal ruled that a public official’s receipt of congratulatory cash gifts provided. The key factors considered by the court in determining cash gifts ranging between 50,000 and 100,000 won for a wedding from employees as bribes include the following: of companies that he came to know through work did not constitute bribery, • The public official mailed out invitations or sent text messages con- as such gifts (not more than 100,000 won) are considered to be within the cerning his daughter’s wedding to persons associated with companies bounds of social norms. However, on 12 December 2013, overturning the that had an interest in his official duties (the duty-related companies) Seoul High Court decision, the Supreme Court ruled that a public official’s and subsequently received cash gifts from such companies; receipt of cash gifts for his daughter’s wedding from persons associated • While some representatives of the duty-related companies did not with companies that were subject to his supervision and authority, whom receive wedding invitations or text messages, such representatives of he came to know through work and with whom he did not have a personal the duty-related companies nevertheless gave cash gifts to the public relationship, constitutes bribery irrespective of the amount. In reaching its official (directly or by giving the cash gift to a public official’s subor- decision, the Supreme Court considered various factors including the fol- dinate to be relayed to the public official), and the public official was lowing: the public official had universally sent wedding invitations to per- aware that such representatives of the duty-related companies had sonnel of companies under his jurisdiction relying on name cards received given cash gifts; from such personnel and subsequently received cash gifts; the persons • The representatives of the duty-related companies (whether they invited from such companies did not have a personal relationship with the had been invited to the wedding or sent cash gifts without receiving public official – rather, most of the providers of congratulatory payments an invitation), had merely met the public official on business once or had met the public official only once or twice during a visit to the relevant twice and did not have a personal relationship with the public official; government office on business; the invitees were in a position to fear they and might be disadvantaged if they did not give cash gifts or to expect to receive • The representatives of the duty-related companies used company certain extent of conveniences through developing an amicable relation- funds to make the cash gifts or used personal funds but subsequently ship with the public official; and sending wedding invitations and subse- sought reimbursement from their company as a business expense. quently receiving cash gifts could sufficiently lead the public to question
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126 Getting the Deal Through – Anti-Corruption Regulation 2015 Lampert & Partner Attorneys at Law Ltd LIECHTENSTEIN
Liechtenstein
Siegbert Lampert Lampert & Partner Attorneys at Law Ltd
1 International anti-corruption conventions 2 Foreign and domestic bribery laws To which international anti-corruption conventions is your Identify and describe your national laws and regulations country a signatory? prohibiting bribery of foreign public officials (foreign bribery laws) and domestic public officials (domestic bribery laws). Recent anti-corruption conventions signed by Liechtenstein include the United Nations Convention against Corruption (UNCAC) in 2003, which Active and passive corruption of domestic officials is criminalised under was ratified in 2009 and put into force in August 2010, and the United section 302ff of the Liechtenstein Penal Code. Nations Convention against Transnational Organized Crime and the pro- Active corruption is defined as offering, promising or giving any advan- tocols thereto (especially the Palermo Agreement), which entered into tage to a member of a legislative or administrative body, a manager of a force in Liechtenstein in March 2008. public enterprise or an expert, for the benefit of that person or anyone else, Furthermore, Liechtenstein has signed the Criminal Law Convention for him or her to act, or refrain from acting in relation to his or her official on Corruption of the Council of Europe and therefore is member of the activity, in breach of his or her duties or in exercising his or her discretion. Council of Europe Group of States against Corruption (GRECO). A first Passive corruption is defined respectively as soliciting, receiving a promise Compliance Report on Liechtenstein was published by GRECO in October of or accepting such an advantage by one of the mentioned officials. 2013. The report concluded that Liechtenstein has implemented satisfacto- Bribery in the private sector became an offence with the introduction rily some of the recommendations contained in the Joint First and Second of section 4 in connection with section 22 of the Unfair Competition Act, Round Evaluation Report, whereas other recommendations remain to be which prohibits and punishes both active and passive private bribery. dealt with. Draft legislation to further implement additional recommenda- Furthermore, cases of bribery in the private sector may also be pros- tions is already pending. ecuted according to the general provisions of section 153 of the Penal Code Liechtenstein is active in the prevention of and the fight against corrup- (fraudulent breach of trust), if applicable in the particular circumstances tion at both national and international levels and supports several interna- of the case. tional institutions in anti-corruption projects. Good governance including According to section 302ff of the Liechtenstein Penal Code, any pub- prevention of corruption is a main focus of the Liechtenstein development lic official demanding or accepting any advantage as consideration for any policy according to the new development assistance law. The government action or omission within his official duties is punishable with a term of of the Principality of Liechtenstein supports on an ongoing and substan- imprisonment of up to three years. tial basis for example, the International Centre for Asset Recovery of the According to section 307 of the Liechtenstein Penal Code, anybody Basel Institute on Governance. In November 2011, Liechtenstein signed offering an advantage to a public official or a third party will be punished the Agreement for the Establishment of the International Anti-Corruption with a term of imprisonment of up to two years. Academy (IACA, Austria) as an international organisation. Finally, handling any proceeds of corruption also constitutes the crime The anti-money laundering legislation of Liechtenstein, especially of money laundering according to section 165 of the Penal Code, which important in corruption cases, and its implementation and practical appli- expressly mentions corruption offences as indicative offences of money cation is very strict. Comprehensive due diligence rules oblige banks and laundering. all other financial intermediaries to identify the contractual partner and the beneficial owner of any funds. Banks have to identify their customers Foreign bribery and there are specific provisions with regard to politically exposed persons. Banks and other financial intermediaries are obliged to submit suspicious 3 Legal framework transaction reports to the national Financial Intelligence Unit (FIU) in Describe the elements of the law prohibiting bribery of a case of any suspicion of specified illegal activities, including corruption foreign public official. offences, and if substantiated, they are obliged to immediately block respective accounts. Liechtenstein has fully implemented the third EU Active corruption of a foreign public official is included in the same provi- Anti-Money Laundering Directive. sions of the law that also prohibit active corruption of a domestic official. Liechtenstein banking secrecy does not offer any protection against According to section 307 of the Penal Code, anybody offering, promising criminal prosecution, including with respect to international legal assis- or giving any advantage to a foreign public official so that this public -offi tance. There are effective measures in place to prevent assets from being cial will act, or refrain from acting in relation to his or her official activity, withdrawn. Within the framework of legal assistance, Liechtenstein in breach of his or her duties, will be punished with imprisonment of up to supplies the state that has submitted a request with details of suspicious two years. accounts that can be used as evidence in criminal procedures or legal Passive corruption of a foreign public official is not a crime according proceedings. Liechtenstein cooperates with the states concerned to find to the Liechtenstein Penal Code. ways to return the assets to the rightful owners (see Basel Institute on Governance, country profile of Liechtenstein, at www.assetrecovery.org). 4 Definition of a foreign public official How does your law define a foreign public official? The definition of an foreign public official corresponds to the requirements of the OECD Anti-Bribery Convention and includes any person holding an office in the foreign state in legislation, administration or in the judiciary, who acts on behalf of a foreign state, an administrative body or a foreign
www.gettingthedealthrough.com 127 LIECHTENSTEIN Lampert & Partner Attorneys at Law Ltd public enterprise or who is an official of an international organisation (sec- 10 Agency enforcement tion 74.4a of the Penal Code). What government agencies enforce the foreign bribery laws and regulations? 5 Travel and entertainment restrictions To what extent do your anti-bribery laws restrict providing The Ministry of Justice of the Liechtenstein government is the central authority to receive and handle respective requests regarding cases of foreign officials with gifts, travel expenses, meals or international cooperation by way of mutual legal assistance. From there entertainment? the respective request will be forwarded to the district court to conduct In general, any undue advantage given, promised or offered with the pur- investigations, freeze assets and collect evidence to be forwarded to the pose of influencing the foreign public official’s decision about acting or foreign requesting authority by respective court orders. refraining from acting in a specific way, which is in breach of his or her Through the courts, the Attorney General’s Office, the national police duties, is covered by section 307 of the Penal Code; the undue advantage with its specialised department on economic crime, the national FIU and can be of any nature. Only if the advantage is of negligible nature, may the possibly also the Financial Market Authority and other administrative prosecutor or the court refrain from prosecuting the case (section 42 of the bodies get involved as well. As soon as these additional agencies are Penal Code). involved, national investigations and proceedings will be opened and The understanding of the Liechtenstein legal system with respect to conducted. the punishment of active corruption of a foreign public official is general and broad. 11 Leniency Is there a mechanism for companies to disclose violations in 6 Facilitating payments exchange for lesser penalties? Do the laws and regulations permit facilitating or ‘grease’ Based on the new section 74b of the Penal Code there is now a mecha- payments? nism for companies to disclose violations in exchange for lesser penalties. Facilitating or ‘grease’ payments paid to a foreign public official are in Depending on whether the legal entity indemnifies the victim of any ille- general also covered by the respective bribery provisions of the law and are gal activities or compensates for damages produced by this activity, and therefore prohibited, if these ‘bribes’ affect the public official’s acting or whether the legal entity is cooperative with the investigating authorities, refraining from acting in breach of his or her duties. this will be taken into account by the court when determining sanctions for the legal entity and its representatives. 7 Payments through intermediaries or third parties 12 Dispute resolution In what circumstances do the laws prohibit payments through intermediaries or third parties to foreign public officials? Can enforcement matters be resolved through plea agreements, settlement agreements, prosecutorial discretion The law expressly states in section 307 of the Penal Code that granting, or similar means without a trial? promising or offering an undue advantage to a foreign public official, either directly or through intermediaries or third parties, will be punish- In Liechtenstein law there are no provisions which would facilitate enforce- able according to the law. ment matters to be resolved through plea agreements, settlement agree- According to section 12 of the Penal Code, an accomplice will be pun- ments, prosecutorial discretion or similar means without a trial. The only ished to the same extent as the main perpetrator of a crime. exceptions are the possibility to reduce the criminal sanctions according to sections 34, 41f or 74b of the Penal Code in cases of full cooperation with 8 Individual and corporate liability the authorities, etc, or in specific circumstances, the possibility of a ‘diver- Can both individuals and companies be held liable for bribery sion’, according to section 22a ff of the Code of Penal Procedure. of a foreign official? 13 Patterns in enforcement In 2010 the Liechtenstein legislator passed an amendment of the Penal Describe any recent shifts in the patterns of enforcement of the Code (section 74aff) with provisions about specific criminal liability of foreign bribery rules. legal entities in general, which applies also to bribery of a foreign official by these legal entities. Based on section 74a of the Penal Code, both the The new provisions of the Penal Code with respect to corruption were company and individuals acting on its behalf may be held liable. introduced in December 2000. According to section 25 of the Unfair Competition Act, a legal entity Since then the United Nations Convention against Corruption and the was already before liable together with the individual acting on its behalf United Nations Convention against Transnational Organized Crime and for respective fines based on this act. the protocols thereto (Palermo Agreement) have been ratified and fully implemented. 9 Civil and criminal enforcement Furthermore, the Act on Mutual Legal Assistance has been amended Is there civil and criminal enforcement of your country’s and the respective regulations have been recently strengthened and tightened. foreign bribery laws? Bribery laws as previously described will be enforced and respective 14 Prosecution of foreign companies offences prosecuted ex officio by the Attorney General’s Office and the In what circumstances can foreign companies be prosecuted courts. The legal basis in the Penal Code is section 302ff with respect to for foreign bribery? corruption, section 165 with respect to money laundering and section 153 with respect to fraudulent breach of trust. A problem with the direct prosecution of a foreign company might be the The proceeds of corruption may be confiscated or forfeited by court establishment of jurisdiction. In general, however, the provisions of the order according to section 20ff of the Liechtenstein Penal Code. Penal Code (section 74a ff) do apply to foreign legal entities as well. The In cases of international mutual legal assistance according to the representatives of a company may, furthermore, be prosecuted for inflic- respective act, legal assistance to a foreign authority will be granted. At tion of foreign bribery laws according to the aforementioned Liechtenstein the same time, a parallel national criminal investigation and a respective laws. For a prosecution there needs to be a connection to the jurisdiction prosecution will usually be initiated in cases, for example, where bribes of Liechtenstein, that is, there must be illegal activities or incriminating have been deposited in accounts within the jurisdiction or there is some assets within the jurisdiction of Liechtenstein. other connection to Liechtenstein. The International Monetary Fund, in a Progress Report in 2008, Foreign civil forfeiture decisions with respect to corruption payments pointed out that the Liechtenstein legal system is very efficient with respect can be enforced in Liechtenstein by way of mutual legal assistance. to forfeiture proceedings, according to section 20 ff of the Penal Code.
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15 Sanctions Financial record keeping What are the sanctions for individuals and companies violating 17 Laws and regulations the foreign bribery rules? What legal rules require accurate corporate books and records, Individuals violating foreign bribery laws and regulations are criminally effective internal company controls, periodic financial liable under the aforementioned provisions of the Penal Code and of the statements or external auditing? Unfair Competition Act. There might, however (also for companies), be collateral sanctions including disqualification from a regulated economic The basic law requiring accurate corporate books and records is the activity, business or industry. In case of criminal sanctions, individuals may Liechtenstein Act on Persons and Companies, according to which com- also be expelled from Liechtenstein, if they are not citizens of Liechtenstein. panies are under an obligation to keep proper (ie, true, fair and complete) As already mentioned, respective proceeds of crime will be confiscated or balance sheets and profit and loss statements according to the general prin- forfeited by court order. ciples on book-keeping and accountancy. A further legal basis for the obligations is the Due Diligence Act (DDA) 16 Recent decisions and investigations and the respective Ordinance (DDO). Special rules apply to companies in specifically regulated sectors such Identify and summarise recent landmark decisions or as banking or insurance. There is no general duty for internal auditing investigations involving foreign bribery. except for specially regulated sectors. A landmark procedure in this respect is certainly the in 2014 successfully concluded the Abacha case, where a judgment of the Appeals Court was 18 Disclosure of violations or irregularities handed down after several years of trial in 2010, confirming a judgment To what extent must companies disclose violations of anti- of the first-instance criminal court. By this judgment all the seized assets bribery laws or associated accounting irregularities? have been declared forfeited; the case was then taken on final appeal to the Constitutional Court, which finally confirmed the forfeiture, as Companies might be obliged to disclose violations of anti-bribery laws or last instance. Since the defendants filed an appeal with the ECHR in associated accounting irregularities according to the DDA or according to Strasbourg, the execution of the national decision and the repatriation of specific regulations of the respective specially regulated sector (eg, in the the monies to the Republic of Nigeria, delayed again, was, however, finally banking industry). arranged in line with the provisions of UNCAC. In this whole matter, proceedings have been and are still conducted 19 Prosecution under financial record keeping legislation in several jurisdictions to recover funds misappropriated by the late Are such laws used to prosecute domestic or foreign bribery? General Sani Abacha, former Prime Minister of Nigeria, in an amount of several billion US dollars. Corresponding proceedings have been initiated In general, financial record keeping legislation, except due diligence leg- in several jurisdictions such as France, Jersey, Liechtenstein, Luxembourg, islation with its obligations to document, monitor and report business Switzerland and the UK, some of which are still pending today. relationships, is rarely used to prosecute domestic or foreign bribery. The evidence obtained in Switzerland and Luxembourg showed impor- tant connections to accounts with Liechtenstein banks. In late July 2000 20 Sanctions for accounting violations a request for mutual legal assistance was lodged with the Liechtenstein What are the sanctions for violations of the accounting rules authorities, which was admitted in August 2000, leading to the freezing of associated with the payment of bribes? more than 10 bank accounts, in which assets totalled more than US$200 million. The Liechtenstein mutual legal assistance proceedings for the The sanctions for violations of the accounting laws and regulations asso- transmittal of evidence to Nigeria have been terminated and the requested ciated with the payment of bribes include fines according to the rules legal assistance has been granted. pertaining to the Commercial Registry and possibly also according to the At the same time, the Liechtenstein authorities initiated a domestic general provisions of the Penal Code. There might be further sanctions in criminal investigation into money laundering, in which Nigeria was admit- connection with the tax laws and for regulated industries according to the ted as a party suing for damages. In the context of their domestic investiga- specific regulations. tion, the Liechtenstein authorities obtained mutual assistance from Austria, Germany, Luxembourg, Nigeria and Switzerland, among others. On 19 21 Tax-deductibility of domestic or foreign bribes January 2005 the Liechtenstein Attorney General’s Office requested the Do your country’s tax laws prohibit the deductibility of indictment of Mohammed Abacha, Abba Abacha and four Liechtenstein domestic or foreign bribes? businessmen for fraudulent breach of trust and money-laundering. On 10 October 2006 a criminal trial began, which was converted into forfei- According to the new Tax Act of 2011 there is now a provision in the tax law ture proceedings regarding the assets frozen in Liechtenstein, owing to that expressly prohibits the deductibility of domestic or foreign bribes. It the absence of the accused from the proceedings. In summer 2014, after is clear, that such payments – irrespective of whether they are transparent the appeal with the ECHR was withdrawn, the Republic of Nigeria, as the or hidden as expenditure – are illegal and can therefore not be deducted, victim of the crimes, received the allocation of the forfeiture proceeds and owing to the fact that corruption is prohibited according to the Penal Code. the whole matter was successfully concluded. This was already recognised practice by the authorities before the new Tax A further recent case is a matter of corruption that involved the bribing Act. of a high-ranking official in the Foreign Ministry of Germany in connection with the sale of military equipment to Saudi Arabia. Domestic bribery Another matter was resolved at the beginning of 2013 involving 22 Legal framework important corruption suspicions against a former member of the Austrian government with regard to the BUWOG affair. Legal assistance has been Describe the individual elements of the law prohibiting bribery granted and the matter now falls to the Austrian courts to deal with. of a domestic public official. Also ongoing is a high-profile matter of a well-known Austrian lobbyist Active and passive corruption of domestic officials is criminalised under involving BAE (dealing with Eurofighter aircraft) and other multinationals section 302ff of the Liechtenstein Penal Code. in connection with investigating political corruption in various important Active corruption is defined as offering, promising or giving any international transactions. advantage to a member of a legislative or administrative body, a manager of a public enterprise or an expert, for the benefit of that person or anyone else, for him or her to act, or refrain from acting in relation to his or her offi- cial activity. Unlike in the case of corruption of a foreign official, the acting or refraining from acting of the domestic public official does not need to be in breach of his or her duties. Passive corruption is defined as soliciting, receiving a promise of or accepting such an advantage by one of the mentioned officials. www.gettingthedealthrough.com 129 LIECHTENSTEIN Lampert & Partner Attorneys at Law Ltd
Update and trends Liechtenstein has ratified the UN Convention against Corruption and in GRECO’s Evaluation Report. The working group’s task remains to implemented its substantive provisions, also taking into account other further develop on an ongoing basis measures to prevent corruption. A relevant European and international instruments. The UN Convention specialist investigation group had already before been created within against Transnational Organised Crime also entered into force in the criminal police division of the national police to combat corruption 2008. Liechtenstein has fully implemented the third EU Anti-Money offences. Laundering Directive. In November 2011, Liechtenstein joined the Agreement for the Liechtenstein became a member of the Council of Europe Group Establishment of the International Anti-Corruption Academy (IACA, of States against Corruption (GRECO) as of 1 January 2010. By joining Austria) and the Liechtenstein government also agreed to additional the other 46 GRECO members on an equal footing, which include financial support for IACA. almost all the Council of Europe member states and the United The Liechtenstein government also continues to support the States, Liechtenstein has accepted to actively commit itself to fighting International Centre for Asset Recovery within the Basel Institute on corruption. A first evaluation report on Liechtenstein was released by Governance at the University of Basel. GRECO in October 2011. The overall conclusion was that the different In its annual activity report the national Financial Intelligence actions and measures taken in Liechtenstein ‘clearly show that the fight Unit pointed out already in May 2013 that the number of suspicious against corruption is on the country’s agenda’. transaction reports by financial intermediaries in connection with A first Compliance Report on Liechtenstein has been published by corruption offences is increasing, which shows the growing sensibility GRECO in October 2013. The report concluded that Liechtenstein has towards corruption offences within the financial industry. implemented satisfactorily some of the recommendations contained Several high-profile cases of international grand corruption have in the Joint First and Second Round Evaluation Report, whereas other been dealt with by the Liechtenstein courts in the course of recent recommendations remain to be dealt with. Draft legislation to further months. The Abacha case in the media widely reported has been implement additional recommendations is already pending. closed by the national courts after several years of trial. Repatriation An interagency ‘Working Group for the Prevention of Corruption’ of the funds to the Republic of Nigeria has in 2014 successfully been exists and was reorganised in 2013 according to a recommendation concluded in line with the provisions of UNCAC.
According to section 302ff of the Liechtenstein Penal Code any pub- official is penalised. According to subparagraph IV of section 304, a public lic official demanding or accepting any advantage as consideration for any official will not be sanctioned if the advantage is of a minor nature. There action or omission within his official duties is punishable with a term of is no specific definition as to what is the value of such a benefit ‘of minor imprisonment of up to three years. nature’. It might be limited to an amount of approximately 200 Swiss According to section 307 of the Liechtenstein Penal Code, anybody francs. Also according to section 39 of the Act on Public Officials, public offering an advantage to a public official or a third party will be punished officials are not allowed to accept gifts or other advantages for themselves with a term of imprisonment of up to two years. or for others, except minor courtesy presents. According to the recom- mendations of a governmental working group, it is recommended for all 23 Prohibitions public officials not to accept any gifts at all. For members of the judiciary, Does the law prohibit both the paying and receiving of a bribe? receiving any benefit is prohibited (article 22 of the Code of Employment of Judges). As mentioned before, according to sections 302ff and 307 of the In cases of acting or refraining from acting in breach of the public Liechtenstein Penal Code, the law prohibits both the paying and the receiv- official’s duties, providing or receiving of whatever benefit is sanctioned. ing of bribes. 27 Gifts and gratuities 24 Public officials Are certain types of gifts and gratuities permissible under your How does your law define a public official and does that domestic bribery laws and, if so, what types? definition include employees of state-owned or state- As mentioned above, according to the law, minor gifts and gratuities with a controlled companies? value not exceeding approximately 200 Swiss francs might be permissible According to the definitions of sections 74.4, 74.4a and 302 ff of the Penal under Liechtenstein domestic bribery laws, as long as the domestic official Code, the qualification ‘public official’ includes any person holding an does not act or refrain from acting in breach of his duties and as long as office in legislation, administration or in the judiciary, who acts on behalf he or she is not a member of the judiciary. However, there is a recommen- of a state, an administrative body or on behalf of a public enterprise. dation within the administration in general not to accept any gifts at all, According to section 309 of the Penal Code a public enterprise is any com- so that there might still be disciplinary sanctions, even if a public official pany ultimately controlled by the state, especially any legal entity in which accepts only such a ‘minor gift’. the state is a shareholder of at least 51 per cent. 28 Private commercial bribery 25 Public official participation in commercial activities Does your country also prohibit private commercial bribery? Can a public official participate in commercial activities while Private commercial bribery is an offence according to section 4 in connec- serving as a public official? tion with section 22 of the Unfair Competition Act, which prohibits and As an exception, an individual holding a full-time position in the public punishes both active and passive private bribery. In the Penal Code there administration or in the judiciary may participate in commercial activi- is no express prohibition of private commercial bribery, unless the circum- ties while serving as a public official, if these activities are of minor nature stances of the case fulfil the preconditions of section 153 (fraudulent breach and do not conflict with the public official’s duties. Express authorisation of trust) of the Penal Code. from the government is required for such private commercial activities of a member of the public administration or the judiciary. 29 Penalties and enforcement What are the sanctions for individuals and companies violating 26 Travel and entertainment the domestic bribery rules? Describe any restrictions on providing domestic officials For individuals, the maximum sanction based on the core provisions of with gifts, travel expenses, meals or entertainment. Do the section 304 ff of the Penal Code can be imprisonment of up to five years in restrictions apply to both the providing and receiving of such the case of passive corruption by a domestic official. According to section benefits? 153 (fraudulent breach of trust) of the Penal Code, imprisonment of up to According to section 302 ff of the Penal Code, the asking or accepting of three years can be the sanction, and in cases of very important damages whatever advantage for the performance of his legal duties by the public (section 153 II of the Penal Code), the sanction can be imprisonment of up to 10 years. Alternatively, there is always the possibility of major fines.
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According to the provisions of the Unfair Competition Act, individu- 31 Recent decisions and investigations als and companies violating these provisions will be sanctioned with major Identify and summarise recent landmark decisions and fines. The company is jointly and severally liable with the individual for the investigations involving domestic bribery laws, including any payment of these fines. investigations or decisions involving foreign companies. A company can be fined based on the new provisions of section 74a ff of the Penal Code as mentioned above, which provides for fines up to a Recent landmark decisions and investigations involving violations of maximum of 2.7 million Swiss francs. domestic bribery laws and investigations or decisions involving foreign companies include the well-known cases of Siemens and Parmalat. 30 Facilitating payments Have the domestic bribery laws been enforced with respect to facilitating or ‘grease’ payments? No case regarding the enforcement of domestic bribery laws with respect to facilitating or ‘grease’ payments is known to have been reported to date.
Siegbert Lampert [email protected]
Landstrasse 104 Tel: +423 233 45 40 PO Box 1257 Fax: +423 233 45 41 9490 Vaduz www.lslaw.li Liechtenstein
www.gettingthedealthrough.com 131 MALAYSIA BON, Advocates
Malaysia
New Sin Yew and Joshua Tay H’ng Foong BON, Advocates
1 International anti-corruption conventions by a commission or corporation established to perform a duty or function To which international anti-corruption conventions is your on behalf of a foreign country or who is authorised by a public international organisation to act of behalf the organisation. country a signatory? On International Anti-Corruption Day, 9 December 2003, Malaysia 5 Travel and entertainment restrictions signed the United Nations Convention against Corruption (UNCAC). To what extent do your anti-bribery laws restrict providing Malaysia later ratified UNCAC on 24 September 2008 with a reservation foreign officials with gifts, travel expenses, meals or to article 66, paragraph 2. In addition, Malaysia signed the United Nations entertainment? Convention against Transnational Organized Crime (UNCTOC) on 26 September 2002 and ratified the same on 24 September 2004. Malaysia’s anti-bribery laws prohibit gifts, travel expenses, meals or enter- tainment privileges if the intended purpose of such gifts is as a form of 2 Foreign and domestic bribery laws gratification to secure certain favours, advantages, services or benefits. Identify and describe your national laws and regulations ‘Gratification’ includes tangibles such as money, property, gifts and non- prohibiting bribery of foreign public officials (foreign bribery pecuniary intangibles such as office or employment, dignity, promises or undertakings. laws) and domestic public officials (domestic bribery laws). The factual circumstances of each case are relevant in determining The Malaysian Anti-Corruption Commission Act 2009 (MACC Act) came if the gift is a form of prohibited gratification. However, section 57 of the into force on 1 January 2009 and has 74 sections dealing with a wide range MACC Act renders inadmissible as evidence that the impugned gratifica- of corrupt practices and abuse of power in the public and private sectors. tion is customary in the profession, trade or on a social occasion. Bribery of foreign and domestic public officials is prohibited under the MACC Act. 6 Facilitating payments One of the major features of the MACC Act is the establishment of the Do the laws and regulations permit facilitating or ‘grease’ Malaysian Anti-Corruption Commission (MACC), which is empowered to payments? search premises, seize assets, investigate cases and arrest offenders. An Anti-Corruption Advisory Board, Special Committee on Corruption and Facilitation or ‘grease’ payments are prohibited. Complaints Committee function as part of an internal mechanism to audit the MACC’s work. 7 Payments through intermediaries or third parties Sections 161 to 165 of the Penal Code provide for various offences of In what circumstances do the laws prohibit payments through bribery of domestic public officials such as the giving or receiving of grati- intermediaries or third parties to foreign public officials? fication to influence a public servant in exercise of his or her public duties. Other relevant laws and regulations governing bribery include Section 22 of the MACC Act prohibits payments as gratification made the Customs Act 1967, the Anti-Money Laundering and Anti-Terrorism through intermediaries or third parties to foreign public officials as an Financing Act 2001 (AMLA) and the Public Service Department’s inducement or reward. Section 17 makes it an offence for any agent to offer Guidelines for Giving and Receiving Gifts in the Public Service (No. 3 of or accept any gratification as an inducement or reward in relation to the 1998). principal’s affairs or business. An intermediary or third party will be liable under section 28 for an Foreign bribery offence of bribing a foreign public official if he or she abets or is engaged in a criminal conspiracy to commit the offence. Section 107 of the Penal Code 3 Legal framework also makes abetment a criminal offence. Abetment is defined as instigat- Describe the elements of the law prohibiting bribery of a ing, engaging with one or more person or persons in any conspiracy and foreign public official. intentionally aiding by any act or illegal omission. Section 22 of the MACC Act prohibits bribery of a foreign public official. 8 Individual and corporate liability Any person who by himself, or in conjunction with any other person, gives to a foreign public official any gratification as an inducement or reward Can both individuals and companies be held liable for bribery on account of the official using his or her position to influence any act or of a foreign official? decision, or to procure the granting of any contract for the benefit of any The term ‘person’ is used in the MACC Act and the Penal Code and there- person, or generally to perform or abstain from performing his or her fore individuals may be prosecuted for corrupt practices. official duties, commits an offence. Further, it is an offence for a foreign Currently, there are no specific provisions in the MACC Act or the public official to solicit, accept or obtain such gratification. Penal Code empowering the prosecution of corporations. No ‘deeming’ provisions are available to impute or transfer the liability of a corporation 4 Definition of a foreign public official on a director or employee for purposes of a criminal case. How does your law define a foreign public official? Section 3 of the MACC Act defines a foreign public official as including any person who holds a legislative, administrative or judicial office, who exer- cises a public function for a foreign country including a person employed
132 Getting the Deal Through – Anti-Corruption Regulation 2015 BON, Advocates MALAYSIA
9 Civil and criminal enforcement if the offence under the act is against a Malaysian citizen or in respect of the Is there civil and criminal enforcement of your country’s Malaysian government’s property. foreign bribery laws? 15 Sanctions Section 22 of the MACC Act is a new provision in criminal law. There have What are the sanctions for individuals and companies violating been no reported or published cases on section 22 known to us. the foreign bribery rules? With regard to civil enforcement, the AMLA has been utilised to seize, freeze and forfeit assets of offenders involved in cheating and cor- Under section 24 of the MACC Act, a person who bribes a foreign public rupt practices. No reported or published cases related to foreign bribery official is liable to imprisonment for a term not exceeding 20 years and a offences are known to us. fine not less than five times the sum or value of the impugned gratifica- tion where such gratification is capable of being valued or 10,000 ringgit, 10 Agency enforcement whichever is the higher. What government agencies enforce the foreign bribery laws Under section 130 of the Companies Act 1965 (CA), it is an offence to be a director, manager or promoter of a company within a period of five and regulations? years after a person’s conviction (or release from imprisonment) for an The relevant bodies involved are the MACC, the Royal Malaysia Police, offence involving fraud or dishonesty punishable with imprisonment of the Central Bank’s Financial Intelligence Unit and the Attorney-General’s three months or more. Chambers, which acts as the Public Prosecutor. 16 Recent decisions and investigations 11 Leniency Identify and summarise recent landmark decisions or Is there a mechanism for companies to disclose violations in investigations involving foreign bribery. exchange for lesser penalties? There have been no recently reported or published decisions or investiga- With regard to formal mechanisms, there are three. tions involving foreign bribery known to us. First, in the limited circumstance that the Public Prosecutor requires a co-accused to testify as a witness for the prosecution, section 63 of the Financial record keeping MACC Act empowers the court to grant legal immunity to the said witness 17 Laws and regulations if he or she makes a true and full discovery of all things as to which he or she is lawfully examined on. What legal rules require accurate corporate books and records, Second, disclosures by whistle-blowers are governed by the effective internal company controls, periodic financial Whistleblower Protection Act 2010. Subject to strict conditions, whistle- statements or external auditing? blowers who disclose violations of Malaysian law are entitled to legal immunity. Section 167 of the CA requires every company and its directors and manag- Third, a representation may be made to the Public Prosecutor to pre- ers to keep all accounting and other records that will sufficiently explain fer a less serious charge carrying a reduced penalty or to discontinue the the transactions and financial position of the company for a period of seven prosecution based on agreed terms between the parties. years. These records include true and fair profit and loss accounts, balance sheets and any other related documents which may be conveniently and 12 Dispute resolution properly audited. A similar requirement of seven years to keep sufficient records of a Can enforcement matters be resolved through plea business’s income or loss is imposed by section 82 of the Income Tax Act agreements, settlement agreements, prosecutorial discretion 1967. or similar means without a trial? Section 13 of the AMLA makes it mandatory for reporting institutions such as banks, insurance companies, gaming houses, moneylenders, and With regard to civil enforcement, agreements may be made between the accounting and law firms to keep a record of domestic and foreign trans- law enforcement agency and party involved to resolve the dispute or to actions exceeding 50,000 ringgit. Such records include documenting the settle impugned transactions. identity and address of the parties involved, and the type, date and time of With regard to criminal enforcement, the Public Prosecutor is vested the transactions. These records must be retained for not less than six years with absolute discretion not to prosecute or to discontinue a prosecution from the date the transaction was completed or account closed. under article 145(3) of the Federal Constitution. A representation may be There is also a requirement under section 319(3) of the Capital Markets made to the Public Prosecutor not to prefer a charge. Once a prosecution is and Services Act 2007 (CMSA) for a listed corporation and its directors to brought, section 172C of the Criminal Procedure Code allows for a formal keep accounting records and other records that will sufficiently explain the plea bargaining process where a lesser penalty or a reduced charge may be transactions and financial position of the company and its related entities. agreed on in exchange for a guilty plea. These records must be retained for seven years. 13 Patterns in enforcement 18 Disclosure of violations or irregularities Describe any recent shifts in the patterns of enforcement of the To what extent must companies disclose violations of anti- foreign bribery rules. bribery laws or associated accounting irregularities? There have been no recently reported or published shifts in the patterns of If a company has been given, promised or offered a bribe or has solicited or enforcement known to us. received the same through its employees or agents, there is a duty to report details of the event to the MACC under section 25 of the MACC Act. 14 Prosecution of foreign companies Section 174(8A) of the CA requires the auditor of a public company, in In what circumstances can foreign companies be prosecuted the course of the performance of his or her duties, to report to the Registrar for foreign bribery? of Companies any serious offence involving fraud or dishonesty that is being or has been committed by the officers of the company or against the There are no specific provisions in the MACC Act or the Penal Code company. Failure to do so is punishable with imprisonment of seven years empowering the prosecution of companies. Individuals of foreign compa- or 250,000 ringgit or both upon conviction. nies and foreign public officials may be personally prosecuted for offences Similarly, under section 320 of the CMSA, an auditor of a listed corpo- committed in Malaysia. ration is immediately required to submit a report to the relevant authorities If the offence is committed outside Malaysia by a citizen or permanent if in his or her opinion there has been a breach or non-performance of any resident of Malaysia, the offence may be dealt with as if it was commit- rules of the stock exchange, securities laws or on any matter which may ted in Malaysia under section 66 of the MACC Act. The extra-territorial adversely affect the financial position of the listed corporation. offence may also be prosecuted in Malaysia under section 82 of the AMLA
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19 Prosecution under financial record keeping legislation The Prime Minister’s Guidelines dated 8 March 2010 with regard to Are such laws used to prosecute domestic or foreign bribery? lobbying by government leaders or other persons on official matters out- lines the parameters of support letters and other forms of communication. There have been no reported or published prosecutions involving bribery This is to deter undue influence on the decision-making process by public utilising record keeping laws (as a secondary form of liability) known to us. officials in procurement and licence or permit approvals. Section 23 of the MACC Act prohibits any officer of a public body from 20 Sanctions for accounting violations using his or her position for any gratification, whether for himself or her- What are the sanctions for violations of the accounting rules self, his or her relative or associate. There is a presumption that an officer of a public body used his or her office or position for gratification when he associated with the payment of bribes? or she makes any decision or takes any action in relation to any matter See question 18. which he or she, or his or her relative or associate, is directly or indirectly interested in. 21 Tax-deductibility of domestic or foreign bribes Do your country’s tax laws prohibit the deductibility of 26 Travel and entertainment domestic or foreign bribes? Describe any restrictions on providing domestic officials with gifts, travel expenses, meals or entertainment. Do the Bribes may not be deducted from taxes. restrictions apply to both the providing and receiving of Domestic bribery such benefits? 22 Legal framework See question 5. Regulation 8 of the Public Officers (Conduct and Discipline) Describe the individual elements of the law prohibiting bribery Regulation 1993, amended in 2002, prohibits a public official from giving of a domestic public official. or receiving either personally or through his or her spouse or any other person any gifts to or from any association, body or group of persons if it Section 21 of the MACC Act prohibits bribery of an officer of any public is in relation to the exercise of the official’s duty and the value of the gift body. Any person who offers to a public official or, being an official, accepts is not commensurate with the purpose of the gift. The official may receive any gratification as an inducement or a reward to perform or abstain from the gift if in the circumstances he or she is unsure of the value or he or she performing, or to aid in procuring or expediting the performance of any is in a situation that would make it difficult for him or her to reject the gift in official act, or to show or forbear to show any favour or disfavour in his which case the official must report the event as soon as practicable. capacity as such officer, commits an offence. Entertainment expenses may be received or given insofar as it does not influence the execution of the official’s duty for any person and is not 23 Prohibitions inconsistent with the official’s duty to avoid a conflict of interest under Does the law prohibit both the paying and receiving of a bribe? regulation 4(2). Officers and staff of the Prime Minister’s Office are, how- Section 21 of the MACC Act covers both instances. ever, prohibited from accepting gifts and entertainment in relation to the performance of official duties even in the case where the same are given by 24 Public officials family members. The government’s heads of department may seek a written explana- How does your law define a public official and does that tion from public officials in the department if he or she is of the opinion that definition include employees of state-owned or state- the official is living beyond his or her means or has assets that an official controlled companies? would not be reasonably expected to acquire or maintain. In addition, the Treasury’s Circular Letter No. 11 of 1995 provides A public official means any person who is a member, an officer, an guidelines and conditions for public officials regarding overseas trips for employee or a servant of a public body and includes a person receiving any procurement purposes including trips sponsored by companies. remuneration from public funds. State-owned or state-controlled compa- nies are public bodies. 27 Gifts and gratuities 25 Public official participation in commercial activities Are certain types of gifts and gratuities permissible under your domestic bribery laws and, if so, what types? Can a public official participate in commercial activities while serving as a public official? See question 26. Public officials may not participate in commercial activities except with the 28 Private commercial bribery approval of their respective heads of department described in Regulation 5 of the Public Officers (Conduct and Discipline) Regulation 1993. Further, Does your country also prohibit private commercial bribery? Regulation 4(2) prohibits a public official from subordinating his or her Private commercial bribery is prohibited by section 16 of the MACC Act. public duty to his or her private interest, or conduct himself or herself in any manner likely to cause reasonable suspicion that he or she has used 29 Penalties and enforcement his or her position for personal advantage. Regulation 19 of the Public Officers Regulations (Appointment, What are the sanctions for individuals and companies violating Promotion and Termination) 2005 makes it mandatory that all public the domestic bribery rules? officials are to abide by the provisions of the government’s General Under section 21 of the MACC Act, a person who bribes a public official Orders, Service Circulars, Circular Letters and other rules issued by the is liable to imprisonment for a term not exceeding 20 years and a fine not government from time to time. less than five times the sum or value of the impugned gratification where The Code of Ethics of the Prime Minister’s Office dated 24 April 2000 such gratification is capable of being valued or 10,000 ringgit, whichever requires that officers and staff of the Prime Minister’s Office ensure that is the higher. there is no conflict of interest in the performance of their official duties. Under section 130 of the CA it is an offence to be a director, manager There is also a requirement to obtain written permission before they are or promoter of a company within a period of five years after a person’s allowed to participate in any business or transaction. conviction (or release from imprisonment) for an offence involving fraud The government’s Service Circular No. 3/2002 on the ownership and or dishonesty punishable with imprisonment of three months or more. declaration of assets by public officials makes it mandatory for public officials to declare his or her assets once every six years, when required by the government or when acquiring new properties. The Treasury’s Instruction No. 197(3) also requires a declaration of interest in respect of any quotation or tender exercise to be taken.
134 Getting the Deal Through – Anti-Corruption Regulation 2015 BON, Advocates MALAYSIA
Update and trends There have been four recent significant events. Prosecutor; and that as a result of ‘leakages’ in the management of • In November 2014, the Court of Appeal in Latheefa Beebi Koya & public funds by government officers short of corruption reported Anor v Suruhanjaya Pencegahan Rasuah Malaysia & Ors [2014] by the Auditor-General, a new law be enacted to deal with this 7 MLJ 864 settled a vexed question whether the MACC could form of misconduct. These proposals have yet to be adopted by the demand the recording of lawyers’ statements in the course of government. accompanying their clients for investigations. The court held that • The government has proposed to amend the MACC Act by the MACC had no such power. This is a ground-breaking decision including a corporate liability provision that makes corporations on procedure upholding the role of lawyers and solicitor-client liable for the corrupt practices of its employees subject to a due privilege. diligence defence. The drafting of the amendment is in its final • In a move to combat corruption in the corporate sector, the MACC stages. has suggested that chief executive officers to be appointed to • We have seen a far greater use by the police and the MACC of the government-linked or government-owned corporations should first AMLA provisions to seize, freeze and forfeit the bank accounts and be vetted by the MACC to ensure they have a clean record; that the assets of suspects involved in bribery. These actions are taken prior MACC be given prosecutorial powers independent from the Public to prosecution to manage evidentiary and dissipation risks.
30 Facilitating payments of trust amounting to 17 million ringgit while Tan was charged with Have the domestic bribery laws been enforced with respect to breach of trust amounting to 13 million ringgit. Their trials are ongoing. • The conviction of the former chief executive officer of Malaysia’s facilitating or ‘grease’ payments? National Entrepreneur Development Corporation, Ahmadi @ Ahmad Domestic bribery laws have been enforced with respect to ‘grease’ Zukni bin Johari and its secretary, Mohamad Aminuddin bin Md. Zain, payments. was upheld by the Court of Appeal. Ahmadi was sentenced to five years’ imprisonment, while Aminuddin was sentenced to four years’ 31 Recent decisions and investigations imprisonment for forging US$5 billion worth of the Corporation’s bond documents. Identify and summarise recent landmark decisions and • For the first time, a prosecution was brought against a Forestry investigations involving domestic bribery laws, including any Department officer, Amir Sharifuddin bin Aliman, for refusing to investigations or decisions involving foreign companies. comply with a notice to declare assets issued under section 36(3) of the Between 2013 and 2014, there have been a number of high-profile cases MACC Act. Amir initially complied with the notice by declaring his concerning corporations. Notable ones include: assets amounting to about 3.5 million ringgit. On further investigation, • Idris M Shudud and Ishak Yusof, two seniors managers of Malaysia’s the MACC found that Amir and his family’s assets were worth 4.5 mil- state-owned oil corporation, Petroliam Nasional Berhad or lion ringgit. A second notice was issued requiring Amir to explain the PETRONAS, were charged with bribery in the Sessions Court. Idris was discrepancy. He failed to comply and was charged as a result of this. charged with five counts of bribery amounting to 403,000 ringgit as • The MACC, in cooperation with the Malaysian Maritime Enforcement an inducement to approve official PETRONAS documents. Ishak was Agency (MMEA), arrested seven MMEA officers for facilitating bribes charged with three counts of bribery amounting to 23,000 ringgit as in the sums of 1,000 ringgit to 771,000 ringgit by illegal fishing an inducement to supply 125 lorryloads of liquid natural gas to a local syndicates operated by Vietnamese fishermen. Four Vietnamese company. ships were seized with 1,096,000 ringgit in cash. Five officers were • The former chief executive officer of Koperasi Permodalan FELDA charged. One of them pleaded guilty and was sentenced to a day in jail Quality Food Sdn Bhd (KPFQ), Datuk Sarchu Sawal, and a former and a fine of 200,000 ringgit. The rest claimed trial and their cases are director of KPFQ, Datuk Tan Han Kook, were charged with commit- pending in court. ting criminal breach of trust. Sarchu was charged with criminal breach
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New Zealand
Hayden Wilson * Kensington Swan
1 International anti-corruption conventions Foreign bribery To which international anti-corruption conventions is your 3 Legal framework country a signatory? Describe the elements of the law prohibiting bribery of a New Zealand is a signatory, and has ratified, the Organisation for Economic foreign public official. Co-operation and Development (OECD) Convention on Combating Bribery Bribery of a foreign public official is dealt with in section 105C of the Crimes of Foreign Public Officials in International Business Transactions, and the Act 1961. The offence is essentially one of personal dishonesty in obtaining UN Convention Against Transnational Organized Crime. or attempting to obtain a bribe. This section has not yet been considered by New Zealand also signed the UN Convention against Corruption a New Zealand court (although related sections have been recently inter- (UNCAC) in 2003, and is currently working towards its ratification through preted by the New Zealand Supreme Court). The offence has five elements: a series of legislative reforms announced by the Ministry of Justice in First, a person must corruptly give, or offer or agree to give, a bribe August 2013. The Organised Crime and Anti-corruption Legislation Bill to another person. Bribe is widely defined to mean ‘any money, valuable was introduced into Parliament in June 2014. Once it has been passed this consideration, office or employment, or any benefit, whether direct or legislation will enable New Zealand to ratify the UNCAC. indirect’. Courts have determined, in considering related sections, that the term is value-neutral, and simply refers to the subject-matter of corrupt 2 Foreign and domestic bribery laws conduct. The provision of sexual services may be a bribe, and the offer to Identify and describe your national laws and regulations give a bribe may itself amount to a bribe. It is likely that, to amount to a prohibiting bribery of foreign public officials (foreign bribery bribe, the recipient of the bribe must be free to accept or reject the bribe. laws) and domestic public officials (domestic bribery laws). The term ‘corruptly’ has recently been given a wide definition by the New Zealand Supreme Court, in the context of corruption of public officials. The New Zealand prohibits bribery of foreign public officials and domestic Supreme Court commented that ‘it is simply wrong for an official to accept public officials in the Crimes Act 1961. The relevant sections of this Act are money or like benefits’, including gratuities, ‘in return for what has been sections 99 to 106, which create specific offences for bribery and corrup- done in an official capacity’, both because such actions tend to promote tion of judicial officers, ministers of the Crown, Members of Parliament corruption and because ‘there is a fundamental inconsistency between the and law enforcement officers. A general offence of bribery also applies to performance of official functions and the acceptance of private rewards for public officials. These offences are similar in nature, and are addressed doing so’. collectively in this response. The person offering the bribe must do so with the intent to influence The bribery of foreign officials was criminalised by the Crimes or reward the other person. This means that the bribe must be accompa- (Bribery of Foreign Public Officials) Amendment Act 2001 (see question nied with the express or implied idea that the bribe is in connection with 3). This offence applies to conduct both inside and outside New Zealand. a favour that has been sought or may be sought in the future. To show this There is also a related offence of corruptly using official information in intent on the part of the person accepting the bribe, that person must, by this part of the Crimes Act, at section 105A. accepting the bribe, be tacitly or expressly agreeing to comply with such a New Zealand, as a common law legal system, inherited its system of request in the future, or must otherwise be accepting the bribe in connec- law from the United Kingdom. For that reason, much assistance can often tion with a favour already granted. be gained by reference to UK and other common law authorities. In terms The third element is that the person to whom the bribe is offered must of bribery offences, the two jurisdictions are similar, but not identical. be a ‘foreign public official’. This is defined widely, as detailed in question 4. For example, there is, in the United Kingdom, a common law offence of Fourth, the influence that is sought must be in respect of any act or bribery. However, as New Zealand’s criminal law is a code, no common law omission by that person in that person’s official capacity. Essentially, the offence of bribery exists in New Zealand. act or omission must be one that the person will be expected to carry out Furthermore, the bribery offences applying to public officials ‘patently’ or fail to carry out while performing his or her official role. However, the do not mirror or reflect the common law, as the Court of Appeal has official does not need to have the ability to actually perform this act within recently pointed out. The court was specifically dealing with section 103, his or her official capacity. For example, asking someone to award a con- which creates an offence for bribery of Members of Parliament. However, tract as part of their role may (assuming other elements are met) breach as the court recognised, all the bribery offences applying to public officials this section, even where this person does not in fact have the authority in ‘describe substantially the same conduct.’ In summary, New Zealand’s this role to do this. bribery offences should be considered as separate from other jurisdictions, Fifth, the person attempting to bribe must do this with the purpose although assistance may still be gained from overseas decisions. of obtaining or retaining business, or obtaining any improper advantage Public officials may also be proceeded against under the Secret in the conduct of business. This fifth element supplies part of the neces- Commissions Act 1910 (which is detailed below). The Secret Commissions sary intent required. It is likely that the term ‘business’ encompasses all Act carries lesser penalties, although these are currently under review. forms of trade and commerce. This element will often assist in determin- The Organised Crime and Anti-corruption Legislation Bill was introduced ing whether an act was carried out ‘corruptly’, as mentioned above. to Parliament in June 2014 and proposes to increase the maximum pen- A person will not commit this offence by virtue of meeting all the alty under the Secret Commissions Act to seven years’ imprisonment. elements above if the value of the benefit sought is so small as to be a mere However, until these changes are implemented, it is more likely that a token payment (see question 30), or if the purpose is solely or mainly to prosecution would first be attempted under the more stringent sections in ensure or facilitate the performance by a foreign public official of a routine the Crimes Act. government function. This is not a separate defence; rather, it is an element
136 Getting the Deal Through – Anti-Corruption Regulation 2015 Kensington Swan NEW ZEALAND of the offence that must be proved by the prosecution. This element has the 7 Payments through intermediaries or third parties effect of authorising certain facilitation payments, where they are made to In what circumstances do the laws prohibit payments through assist in the official performing an ordinary, day-to-day government func- intermediaries or third parties to foreign public officials? tion. However, for avoidance of doubt, the defence of reasonable custom- ary behaviour described in question 30 does not apply to this offence. The definition of ‘foreign public official’, as detailed in question 4, is wide. This offence is extraterritorial, meaning a person (or corporation) may Payments through intermediaries or third parties will be prohibited where be prosecuted for this act in New Zealand even where the offence occurred the payment is to a person or company that is controlled by a foreign overseas, by virtue of section 105D. However, section 105E provides an government. exception that, if the act carried out overseas is legal in that overseas juris- For avoidance of doubt, the word ‘controlled’ has its ordinary mean- diction at the time it is carried out, an offence under section 105D will not ing, ie, a person or company will be ‘controlled’ in this way where the for- have been committed. eign government has the ability to command them to perform or omit to perform some act. 4 Definition of a foreign public official How does your law define a foreign public official? 8 Individual and corporate liability Can both individuals and companies be held liable for bribery This is defined in section 105C(1) of the Crimes Act 1961 as including: of a foreign official? • a member or officer of the executive, judiciary, or legislature of a for- eign country; Yes, a company can be held criminally liable for bribery of a foreign official • a person who is employed by a foreign government, foreign public where the facts establish that the acts of the officers, directors or managers agency, foreign public enterprise, or public international organisation; are the acts of the company. and However, the penalty for breach of an offence under the Crimes Act • a person, while acting in the service of or purporting to act in the ser- cannot apply to a company. In such a case, the court has power to impose vice of a foreign government, foreign public agency, foreign public a fine. Alternatively, the company can be prosecuted under the Secret enterprises, or public international organisation. Commissions Act for such conduct, and a fine of up to NZ$10,000 for each breach of this Act can be imposed. The terms ‘foreign government’, ‘foreign public agency’, ‘foreign public enterprise’ and ‘foreign public official’ are all defined in the same section 9 Civil and criminal enforcement of the Act. These are all given wide definitions. For example, foreign gov- Is there civil and criminal enforcement of your country’s ernment includes all levels and subdivisions of government, and foreign public agency includes any person, wherever they are, who ‘carries out a foreign bribery laws? public function under the laws of a foreign country’. The Crimes Act 1961 provides for criminal enforcement of bribery of a foreign official. No direct right is provided in this legislation to bring a civil 5 Travel and entertainment restrictions claim. To what extent do your anti-bribery laws restrict providing However, civil remedies are available to interested parties to recover foreign officials with gifts, travel expenses, meals or damages against parties that breach the foreign bribery laws of this Act entertainment? (or, potentially, against those who are not found to have breached this Act, given the different standards required). In most circumstances it is lawful to provide foreign officials with gifts and other items. However, it would be unlawful to do so in two different 10 Agency enforcement circumstances. What government agencies enforce the foreign bribery laws First, such gifts are likely to be caught by section 105C, as noted above, and regulations? where the gifts, travel expenses, meals or entertainment are provided to obtain or retain business or any improper advantage in the conduct of busi- The main enforcement agencies within New Zealand are the New Zealand ness (unless one of the exceptions detailed above applies). Police and the Serious Fraud Office (SFO). In the first instance, all such Second, a prosecution may also be brought under the Secret complaints are referred to the SFO. International complaints can also be Commissions Act. Under this Act it is an offence to give a person a gift as dealt with by the local New Zealand embassy or high commission, if they an inducement or reward in return for that person doing, or omitting to do, occur overseas. an act, or for showing favour or disfavour to any person, in relation to that Within New Zealand, other agencies also have enforcement roles. person’s ‘principal’s affairs or business’. One of these is the New Zealand Export Credit Office (a division of ‘Principal’, in this context, is widely defined and would include the the Treasury), which will void guarantee transactions where bribery is foreign public official’s immediate superior, and the foreign government involved, in line with other export credit agencies within the OECD. that official is a representative of. A defence exists for ‘reasonable custom- ary behaviour’ in respect of a prosecution brought under this Act. 11 Leniency Is there a mechanism for companies to disclose violations in 6 Facilitating payments exchange for lesser penalties? Do the laws and regulations permit facilitating or ‘grease’ payments? There is no specific mechanism in the Crimes Act for companies to disclose violations in exchange for lesser penalties. It is generally permissible to provide certain payments, including ‘gratui- However, there is a mechanism for an employee of such a company (or ties’, to facilitate the acts of a foreign public official. These payments will an employee of a public sector agency) to disclose any dangerous or illegal not give rise to an offence where the value received is small, or where these act committed by his or her employer. This is provided by the Protected payments are only to facilitate the official in carrying out an ordinary, day- Disclosures Act 2000 and protects such employees from dismissal or to-day function. harassment, as well as providing some protection from civil and criminal Payments will breach the Act if they are unusual, or are made to assist liability. in carrying out an act that is likely to be highly valued by the person offer- Furthermore, when sentencing, courts will be guided by all the cir- ing the payment. It is also not a defence to argue that these payments are cumstances in each particular case. Disclosure of violations, if it occurs, customary (although this may apply to a breach of the Secret Commissions is likely to be a relevant factor in foreign bribery cases, and the court may Act). impose a lesser penalty than it otherwise would for such disclosure.
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12 Dispute resolution 16 Recent decisions and investigations Can enforcement matters be resolved through plea Identify and summarise recent landmark decisions or agreements, settlement agreements, prosecutorial discretion investigations involving foreign bribery. or similar means without a trial? See question 13. Yes, there is a power to exercise prosecutorial discretion. However, this is subject to the inherent remedial power of the court to correct abuses of Financial record keeping power. For further information, see the Crown Law Prosecution Guidelines 17 Laws and regulations (updated 1 July 2013), published by the New Zealand Crown Law Office. No prosecution under the foreign bribery provisions of the Crimes Act What legal rules require accurate corporate books and records, or any section of the Secret Commissions Act can be initiated without the effective internal company controls, periodic financial leave of the Attorney-General. statements or external auditing?
13 Patterns in enforcement Companies’ reporting requirements are governed primarily by the Companies Act 1993 and the Financial Reporting Act 1993. The Companies Describe any recent shifts in the patterns of enforcement of the Act sets out the basic requirements in respect of company controls and foreign bribery rules. the keeping of company records. The Financial Reporting Act contains detailed rules regulating the content of companies’ financial statements. In 2005, the Ministry of Foreign Affairs and Trade investigated New Each company is required to keep accurate record books at its regis- Zealand companies associated with the United Nations Oil-for-Food tered office. These records must correctly explain the transactions of the Programme in Iraq, but found these companies had acted properly. company with sufficient detail that the financial position of the company Transparency International commented in its 2013 Progress Report on can be determined with reasonable accuracy. Company records must con- the OECD Anti-Bribery Convention that awareness of foreign corruption tain a variety of information, including a copy of the company’s constitu- prohibitions and risks in New Zealand is insufficient. It recommended that tion, minutes, certificates of directors, copies of all financial statements the SFO and other agencies encourage the reporting of suspected foreign and accounting records. bribery and strengthen public awareness of foreign and domestic bribery Company directors are obliged to provide annual reports before the risks, the amendment of New Zealand’s bribery and corruption offences company in a general meeting at least once a year. All members of a com- to align them with international standards, ratification of UNCAC, and pany are entitled to receive the company’s accounts, together with an audi- implementation of a national anti-corruption strategy. Many of these tor’s report of the company. Active companies (ie, those actually carrying concerns are addressed by the Organised Crime and Anti-corruption out business) must prepare financial statements, and may have to prepare Legislation Bill, which was introduced to Parliament in June 2014. Once annual reports unless released from this obligation by shareholders. enacted, the legislation will allow New Zealand to ratify the UNCAC and Some companies are exempt from the robust provisions of the Financial increase compliance with the OECD Anti-Bribery Convention. Reporting Act (eg, those which have no subsidiaries, have small staff and revenue, and are not overseas companies). For those companies not 14 Prosecution of foreign companies exempted from this Act, the Act sets out in detail a variety of information In what circumstances can foreign companies be prosecuted that is required to be included within each company’s financial statements. for foreign bribery? Overarching these requirements is a general requirement for all compa- nies to have effective internal company controls. Directors may be liable for Foreign companies can be prosecuted for foreign bribery where the bribery breach of director’s duties for failing to ensure this to a reasonable standard. occurred at a time when it was illegal in the jurisdiction in which the brib- ery occurred. Bringing a claim against a foreign company will, however, be 18 Disclosure of violations or irregularities limited by the practical difficulties inherent in pursuing litigation against foreigners. This is lessened by the application of the Mutual Assistance in To what extent must companies disclose violations of anti- Criminal Matters Act 1992, which provides for assistance between certain bribery laws or associated accounting irregularities? countries in criminal proceedings. Companies must disclose violations as part of general disclosure requirements. 15 Sanctions There is no specific requirement to disclose violations of anti-bribery What are the sanctions for individuals and companies violating laws. However, liability may arise from the Crimes Act, Secret Commissions the foreign bribery rules? Act, Companies Act or Financial Reporting Act. A failure to fully disclose information in accounts creates criminal lia- An individual can be sentenced for up to seven years’ imprisonment for bility under various sections of the Crimes Act 1961. For example, section each violation of section 105C. Furthermore, the assets a person has 260 of this Act provides offences relating to false accounting. Specifically, acquired through corrupt behaviour can be ordered forfeited to the New it is an offence to make false entries, and also an offence to omit material Zealand government under the Criminal Proceeds (Recovery) Act 2009. information from accounting records. It is likely that this section would There is also a power to extradite people involved in these offences. cover a wide variety of accounts, including data stored electronically. This The Treasury’s New Zealand Export Credit Office is empowered to section includes a requirement that the records be used for accounting pur- take action to combat bribery. The office has a wide discretion including poses. This has not been litigated, but may extend to records that have a denying payment or indemnification, ordering repayment of sums paid or subsidiary use as an accounting purpose, even if they are not made primar- referring evidence of bribery to other appropriate authorities. Similarly, ily for business use. companies convicted of foreign bribery or fraud offences will be excluded This offence complements section 258 of the Crimes Act, which pro- from NZAID contracts, or from tenders put out by the New Zealand vides an offence for falsifying entire documents (in contrast to this section government. 260 offence, which is directed to the falsification of a specific part of a -doc In terms of collateral attacks, a conviction under foreign bribery crimi- ument). These, and related offences under the Act, are punishable by up to nal laws will be strong evidence in any civil suit brought subsequently. 10 years’ imprisonment. Where the individual offering the bribe is employed by the New It is also an offence for any person to provide a receipt, account, or Zealand government, or by a company or agency deemed to be carry- other document to an agent that is false or in any way misleading, with ing out public functions, further actions may ensue. First, it is possible intent to deceive the agent’s principal. An agent commits a further offence that judicial review proceedings may be brought against that individual, by passing this false document on to a principal, so long as the agent company or agency. Second, investigations may be launched to inves- knows of the false or misleading nature of the document (section 6, Secret tigate offers of bribery by the public sector. The Office of the Controller Commissions Act). and Auditor-General and the Office of the Ombudsman in New Zealand The penalty for any breach of the Secret Commissions Act is set out in can help uncover bribery in the public sector and hold public agencies to section 13. This provides that a person convicted of an offence against that account by investigating and reporting on any alleged bribery. Act is liable for a fine of up to NZ$1,000 or up to two years’ imprisonment. The maximum fine is doubled if a corporation is convicted.
138 Getting the Deal Through – Anti-Corruption Regulation 2015 Kensington Swan NEW ZEALAND
Various offences are applicable under the Companies Act and Financial body, or anyone employed within the education service (regardless of how Reporting Act. For example, under section 194 of the Companies Act, com- they are remunerated), except a chief executive. panies are required to keep accounting records and correctly record and The inclusion in this definition of the term ‘public body’ may bring explain the transactions of the company. A company and a director may per- state-owned and state-controlled companies within its orbit (this is yet sonally be fined up to NZ$10,000 for a breach of accounting requirements. to be tested). Courts in New Zealand have held that state-owned enter- Similar obligations are increased to NZ$200,000 under the Financial prises may be considered ‘public bodies’ in respect of certain functions Reporting Act or a period of imprisonment of up to five years in certain cases. and contexts and ‘private bodies’ with regards to others. Therefore, when Further obligations apply to members of the New Zealand Institute of considering whether a state-owned or state-controlled enterprise is liable Chartered Accountants, which is given statutory recognition by the New under this section, a court is likely to focus on the element of the act itself: Zealand Institute of Chartered Accountants Act 1996. where the bribe was offered or received to induce an act that, in the circum- stances, is considered to be public then it is likely that the state-owned or 19 Prosecution under financial record keeping legislation state-controlled enterprise would also be held to be a ‘public body’ in the Are such laws used to prosecute domestic or foreign bribery? circumstances.
There have been no reported prosecutions of foreign bribery in New 25 Public official participation in commercial activities Zealand yet (see question 13). Can a public official participate in commercial activities while Those charged with domestic bribery offences are sometimes con- serving as a public official? currently charged with offences arising from breaches of financial record keeping laws. For example, in 2006 two employees of a parking com- In general, yes. pany were convicted of accepting a secret commission under the Secret State servants (ie, those employed in government departments and Commissions Act and with using a document with intent to defraud under other government agencies) must abide by the Code of Conduct for State section 229A(b) of the Crimes Act. Servants. Guidance issued by the State Services Commission in June 2007 states: 20 Sanctions for accounting violations Any commercial activities, investments or other personal interest What are the sanctions for violations of the accounting rules must not influence the work we do, and we must be open in declaring associated with the payment of bribes? where our interest may potentially conflict with our responsibilities. Just as we must first obtain the consent of our organisation before undertaking See question 18. additional employment so that any conflicts can be avoided, we must also disclose any commercial business we set up that will operate concurrently 21 Tax-deductibility of domestic or foreign bribes with our work in the State Services. Do your country’s tax laws prohibit the deductibility of However, as noted, in some contexts employees of state-controlled or state-owned enterprises may also be public officials. These employees domestic or foreign bribes? would only be restricted from engaging in (other) commercial activities to New Zealand’s tax laws prohibit the deductibility of domestic bribes paid the extent that their employment contracts (and associated organisation to foreign and domestic public officials under section DB 45 of the Income guidelines) restricted them from doing so. Tax Act 2007 where these bribes are prohibited under the Crimes Act. There is no prohibition in relation to private bribes. 26 Travel and entertainment Describe any restrictions on providing domestic officials Domestic bribery with gifts, travel expenses, meals or entertainment. Do the 22 Legal framework restrictions apply to both the providing and receiving of such Describe the individual elements of the law prohibiting bribery benefits? of a domestic public official. State servants must decline gifts or benefits that place them under any These are similar to the elements of the law that apply to a foreign public obligation or perceived influence, and must generally abide by various official. In summary, it is an offence to corruptly offer or attempt to offer public sector guidelines. The State Services Commission advises further any bribe in respect of any act done or omitted or to be done or omitted by that there: a public official in his or her official capacity. The offence also has extra- territorial jurisdiction, meaning acts committed anywhere in the world in will usually be perceptions of influence or personal benefit if we accept respect of a New Zealand public official may amount to a breach of these gifts, hospitality or ‘quid pro quo’ exchanges of favours… In all cases, sections of the Crimes Act. it is to be expected that gifts will only be accepted following a trans- One difference between domestic and foreign bribery is that foreign parent process of declaration and registration…[C]eremonial gifts … bribery requires that the bribe is provided to obtain or retain business, or to are expected to remain the property of our organisation …. [Offers and obtain an improper advantage. Domestic bribery contains no such limita- gifts] must always be assessed in terms of the purpose of the donor. tion, and applies to any bribery that is ‘corrupt’. Analogous provisions apply to the public official for accepting, or Again, insofar as employees of state-controlled or state-owned enterprises agreeing to accept, such a bribe. are public officials, they are only restricted by individual employment agreements and associated organisation guidelines. 23 Prohibitions Domestic officials will also be caught by the Secret Commissions Act 1910. This provides, in section 3, that is an offence to corruptly give, or offer Does the law prohibit both the paying and receiving of a bribe? to give, to an agent any gift or other consideration as an inducement or Yes. However, a distinction arises with respect to ‘gratuities’, as discussed reward in respect of any act that relates to the agent’s affairs or business, or in questions 27 and 30. Although it is an offence for a public official to for showing favour or disfavour. This extends to acts that the agent in fact accept such a gratuity, it is not an offence to offer one, owing to differences has no authority to do, and to gifts given to recognised intermediaries, such in statutory language. as family members, of the agent.
24 Public officials 27 Gifts and gratuities How does your law define a public official and does that Are certain types of gifts and gratuities permissible under your definition include employees of state-owned or state- domestic bribery laws and, if so, what types? controlled companies? To an extent, yes. It is permissible to give gifts and other gratuities, so long as these are given in a way that are do not trigger section 105 of the Crimes Official is defined to mean ‘any person in the service of Her Majesty in right Act 1961 or section 3 of the Secret Commissions Act 1910, for example, of New Zealand (whether that service is honorary or not, and whether it is where gifts are not given corruptly, nor with an intent to influence. within or outside New Zealand)’, or a member of a local authority or public www.gettingthedealthrough.com 139 NEW ZEALAND Kensington Swan
The acceptance of such gifts is more problematic. The Supreme Court 31 Recent decisions and investigations recently commented that the acceptance (although not the offer) of gratui- Identify and summarise recent landmark decisions and ties will be illegal where such gratuities are accepted in a corrupt manner investigations involving domestic bribery laws, including any (which is given a wide definition as set out in question 3), unless the gratui- investigations or decisions involving foreign companies. ties are merely ‘unexceptional token gifts or other benefits’ (as discussed in question 30). The acceptance of such gifts may also breach the State Taito Phillip Field Services Code of Conduct. The most publicised recent investigation, culminating in a series of court decisions, concerned the investigation into the conduct of the former 28 Private commercial bribery Member of Parliament and Associate Minister Taito Phillip Field for brib- Does your country also prohibit private commercial bribery? ery (and corruption and perverting the course of justice). This investiga- tion started after allegations that the MP had traded immigration favours Yes. This is dealt with by the Secret Commissions Act 1910. The Act in return for work on his properties. requires similar elements to those creating offences for public officials. In A number of hearings followed, including an initial hearing required short, a person is guilty of private commercial bribery when that person for the police to obtain permission from the High Court to lay charges corruptly gives, or agrees or offers to give, to any agent, any consideration against a Member of Parliament. Mr Field was convicted in October 2009 (defined widely) as an inducement or reward, to do any act or omission in of 11 bribery and corruption charges, and 15 charges of perverting the relation to that agent’s principal’s affairs or business, or for showing favour course of justice. He unsuccessfully appealed to the Court of Appeal on his or disfavour to any person in relation to that agent’s principal’s business. conviction. In their judgment, the Court of Appeal defined a number of key The policy of this Act has been summarised as follows: concepts relevant to New Zealand’s bribery laws. Mr Field filed an appeal with the Supreme Court, which was heard The prospect of receiving a commission undoubtedly gives to any entre- in June 2011. The Supreme Court released a unanimous decision on 27 preneur a vested interest in the outcome of a transaction. The practice October 2011 upholding the Court of Appeal’s judgment. The Supreme of paying a financial reward to a person who facilitates or finalises a Court clarified New Zealand’s bribery law further, with the recognition of transaction between its parties or introduces those parties is ancient a de minimis exception (see question 30), and by providing comments as and well established. But the vested interest must be disclosed to inter- to the wide meaning to be given to the term ‘corruption’ (see question 3). ested parties or be at the very least ascertainable. No taint attaches to In 2012, the High Court ordered that Mr Field pay a pecuniary agents who perform a useful, often vital, commercial function. A secret penalty of NZ$27,480, which was determined by the court to be the value agent, however, is for obvious reasons suspect. A prospective party to a of benefits he derived from the offences. transaction cannot make an independent assessment about an agent’s objectivity and motivation if the resulting commission is not out in the Other public bribery open. A former manager at the Accident Compensation Corporation, a New Zealand government agency, pleaded guilty to three charges of corruption Additional liability is provided by the Fair Trading Act 1986, which makes it and bribery in February 2011. In March 2011, he was sentenced to 11 months’ a statutory offence to engage, in trade, in misleading or deceptive conduct. home imprisonment and has been ordered to pay back NZ$160,000. This has the effect of capturing bribery, but is a wider offence. Where an The manager in this case took a bribe worth NZ$160,000, was given a offence can be framed as bribery, it will usually be brought under the Secret NZ$9,000 holiday to Singapore and also admitted other acts amounting Commissions Act. to corruption. The SFO, which brought the charges, has also charged a second man in relation to this. It has also stated that the investigation into 29 Penalties and enforcement this conduct revealed ‘wider, and serious issues… including procurement What are the sanctions for individuals and companies violating processes in the public sector, the process for referring corruption allega- the domestic bribery rules? tions to law enforcement agencies, and the scope of New Zealand’s bribery laws’. See questions 8, 15 and 18. Further to these, most offences under the In 2012, the other party to this bribery transaction, a property devel- bribery sections of the Crimes Act carry a sentence of up to seven years’ oper, was sentenced to 11 months’ home imprisonment after pleading imprisonment. However, corruption of a judicial officer, under section guilty to making the NZ$160,000 bribe. He also forfeited NZ$205,659 100, may in certain circumstances give rise to a possible sentence of up to profit in relation to the transaction and paid NZ$101,294 in tax. 14 years’ imprisonment. Also noteworthy is a case brought against a police officer in connec- tion with obtaining sexual services from a sex worker while on duty. The 30 Facilitating payments accused was charged with inducing the worker to have sex with him, and Have the domestic bribery laws been enforced with respect to of corruptly obtaining a bribe under section 104 of the Crimes Act 1961. He facilitating or ‘grease’ payments? was ultimately acquitted of the bribery charge, but convicted of one count of inducing sexual connection (by way of a threat). This case highlights the No. There is a specific exception in section 11 of the Secret Commissions strict requirements for bribery under this Act: here, there was no intention Act that allows for certain customary gifts to be exempt from the Act. on behalf of the sex worker to offer or give sexual services with the inten- To come within this exception, a number of elements are required to be tion of influencing the officer in the exercise of his official (police) pow- proved, including that the conduct in question was customary on 1 January ers; rather, the worker consented to sex because of the threats made by the 1911. However, a wider defence is available under the Crimes Act 1961, by officer to her. showing that the payment was justified or necessary in the circumstances. A number of further bribery prosecutions and convictions have The Supreme Court has also recently recognised a de minimis defence taken place recently focusing on the conduct of police and corrections in relation to small or otherwise token gifts. The court commented that officials. For example, in November 2012 a prison guard appeared in the ‘gifts of token value which are just part of the usual courtesies of life’, such District Court to plead guilty to seven charges of accepting bribes in return as ‘the Member of Parliament who accepts a rugby jersey when opening a for smuggling illegal drugs into prison. Earlier that year, a Corrections rugby club… even if he or she knew in advance of the opening that there Department official was sentenced to imprisonment for two years and nine would be a gift’ will not amount to bribery. The court added that a further months for falsely recording thousands of work hours for 30 offenders sen- safeguard in this area is the requirement for consent to be given by either tenced to community work. In November 2014, a police officer was found the Attorney-General or a High Court judge (depending on the public guilty of accepting a bribe when he used his position to assist an accomplice official concerned) before a prosecution may be brought. in obtaining a car that was not hers. He then accessed the police database to give the accomplice information required to sell the car and accepted a sum of money from her in return. The police officer was sentenced to 12 months’ imprisonment for accepting the bribe, corrupt disclosure of infor- mation and perverting the course of justice.
140 Getting the Deal Through – Anti-Corruption Regulation 2015 Kensington Swan NEW ZEALAND
Update and trends New Zealand consistently ranks highly on Transparency International’s international anti-corruption efforts. In particular, the Organised Crime Corruption Perception Index as having a low perception of corruption and Anti-corruption Legislation Bill was introduced into Parliament in the public sector. However, New Zealand companies are facing in June 2014. Once passed the legislation will enable New Zealand to increased exposure to risks of corruption as trade increases and ratify the UNCAC and more fully comply with the OECD Anti-Bribery operations occur more frequently in countries where corrupt practices Convention. exist. The post-earthquake recovery effort in Christchurch continues In the 2013 National Integrity System Assessment of New Zealand, to be an area of concern. With a projected cost of NZ$40 billion, and Transparency International suggested that it was beyond time to average insurance fraud rates of 5 to 10 per cent of claim value, the take the protection and promotion of integrity in New Zealand more New Zealand Insurance Council has predicted a significant potential seriously. Failure to ratify the UNCAC was a primary reason behind New for fraud and corruption-related loss. The SFO recently completed two Zealand dropping from first to second on the Corruption Perception investigations into allegations of fraud and corruption in the rebuild. Index. Although the SFO found that neither investigation had any grounds for In response to the new challenges which have arisen, New action, it continues to warn of the potential risks of fraud and corruption Zealand has taken steps to strengthen anti-bribery laws and support in Christchurch.
Private commercial bribery In June 2013, a former commercial property manager was sentenced New Zealand has experienced a number of cases of private commercial brib- to five months’ home detention, having pleaded guilty to eight charges laid ery resulting in convictions. The SFO investigates and prosecutes a select by the SFO under section 4 of the Secret Commissions Act. The manager number of cases a year under the Crimes Act and Secret Commissions Act. corruptly received secret commissions from an insurance broker for refer- A recent example of private commercial bribery is the conviction of ring his employer’s insurance business to that broker. His employer was a man at a district health board (DHB), who served as chief information consequently overcharged. Other parties engaged in this offending are still officer and a member of the senior executive, of a variety of offences, being prosecuted. including conviction in November 2010 for accepting a bribe. These Also in June 2013, a dairy producer’s purchasing manager and assis- offences involved the man, along with an accomplice, defrauding the DHB tant/warehouse manager were sentenced for Crimes Act and Secret of NZ$16.9 million over seven years. He was sentenced to nine-and-a-half Commissions Act offences laid by the SFO. The pair pleaded guilty to 33 years in prison for defrauding the DHB of this amount. He was sentenced charges of defrauding their former employer either by the creation of false concurrently to 20 months under section 4 of the Secret Commissions invoices, theft of product or by receiving secret commissions from one Act 1910 for accepting NZ$775,000 in bribes from a friend and business of their employer’s product suppliers. The manager was sentenced to 15 associate. months’ imprisonment and his assistant was sentenced to five months’ This example highlights the distinction between private and public home detention and ordered to pay NZ$25,000 reparation. bribery. It is possible that charges could have been laid under the relevant A high-profile example of breaches of the false accounting offences provisions of the Crimes Act as public official bribery instead, yet those (discussed at question 17) is the recent conviction of a director who involved in this case were charged under the private commercial brib- plead guilty to organising New Zealand’s largest-ever Ponzi scheme. In ery provisions of the Secret Commissions Act. By way of explanation, November 2013, following a joint agency investigation by the SFO and the wrong committed by the associate here was making payments to the Financial Markets Authority, the financial adviser was sentenced to 10 DHB employee ‘for showing favour’ in relation to work carried out by the years and 10 months’ imprisonment for offending including four charges associate, and was characterised as one made in ‘the world of business’ by of false accounting (sections 252 and 260 of the Crimes Act). the sentencing judge. This may explain why charges were brought under private commercial bribery legislation, despite the availability of public Notable recent fraud cases bribery provisions. The collapse of the finance company, South Canterbury Finance Limited, This case is also of interest in highlighting the ability of affected parties resulted in what was described by the SFO as the ‘largest corporate fraud to pursue civil claims for actions of bribery. Following the conviction, both case in New Zealand’s history’. An investigation to determine whether the DHB and the police attempted to pursue the DHB’s former employee to there had been any fraudulent behaviour was commenced after the com- recover the money defrauded from it. The DHB issued a civil claim, while pany was placed into receivership in 2010 owing approximately NZ$1.8 the police pursued a case under the Proceeds of Crime Act (now replaced billion. Three former heads of the company denied various charges, by the Criminal Proceeds (Recovery) Act 2009). including theft by a person in a special relationship, false statements by a promoter, obtaining by false deception and false accounting. The District
Hayden Wilson [email protected]
Level 9, 89 The Terrace Tel: +64 4 472 7877 Wellington 6011 Fax: +64 4 472 2291 New Zealand www.kensingtonswan.com
www.gettingthedealthrough.com 141 NEW ZEALAND Kensington Swan
Court found that two of the accused where not guilty on all charges. The There have also been several recent fraud cases relating to lawyers. In other former director was found guilty on five of nine charges, including July 2014 a lawyer was found guilty of fraud in relation to the collapse of making false statements and misuse of a document for pecuniary advan- Belgrave Finance Ltd. He was charged with making substantive fraudulent tage. In December 2014, the director was sentenced to 12 months’ home representations and misuse of investors’ funds and was sentenced to four detention and 400 hours of community work. years and nine months’ imprisonment. In November 2014 a lawyer was All three directors were found not guilty on one of the most serious sentenced to eight years’ imprisonment for using US$2.8 million of inves- allegations, that they gave information about the extent of related party tors’ money to pay other business debts. transactions in order to get the company into the Crown Retail Deposit Guarantee Scheme. Because of the company’s participation in the scheme, * The author would like to acknowledge the assistance of Amberley James 35,000 investors were bailed out by the taxpayer at a cost of NZ$1.6 billion. and Jessica Milne in the preparation of this chapter. The SFO has been criticised for its management of the investigation, which took over four years to complete. The SFO described the case as the most resource-intensive and time-consuming in recent history.
142 Getting the Deal Through – Anti-Corruption Regulation 2015 Sofunde, Osakwe, Ogundipe & Belgore NIGERIA
Nigeria
Babajide O Ogundipe and Chukwuma Ezediaro Sofunde, Osakwe, Ogundipe & Belgore
1 International anti-corruption conventions a person employed or engaged in any capacity in the public service of the To which international anti-corruption conventions is your Federation, State or Local Government, public corporations or private company wholly or jointly floated by a government or its agency includ- country a signatory? ing the subsidiary of any such company whether located within or outside Nigeria is a signatory to the United Nations Convention against Corruption Nigeria and includes judicial officers serving in Magistrate or Customary (UNCAC) and the African Union Anti-Corruption Convention. Nigeria Courts or Tribunals. signed the UNCAC on 9 December 2003 and the African Union Anti- Given the specific references to persons employed in the public service Corruption Convention on 12 December 2003. It ratified the UNCAC on 14 of one of the three tiers of government created under the Constitution, it December 2004, and the African Union Anti-Corruption Convention on seems that foreign public officials cannot be included in this description. 26 September 2006. 5 Travel and entertainment restrictions 2 Foreign and domestic bribery laws To what extent do your anti-bribery laws restrict providing foreign Identify and describe your national laws and regulations officials with gifts, travel expenses, meals or entertainment? prohibiting bribery of foreign public officials (foreign bribery The anti-bribery laws contain no specific provisions relating to this, and no laws) and domestic public officials (domestic bribery laws). guidelines are available as to the extent of what is permissible. Nigerian law has no specific legislation prohibiting the bribery of foreign public officials. Given that Nigeria has been and principally remains a 6 Facilitating payments nation seeking foreign investment and assistance, the bribing of foreign Do the laws and regulations permit facilitating or ‘grease’ public officials has not been considered an important issue. payments? Nigeria has, however, legislated against the bribing of domestic public officials and the provisions can be found in the criminal codes of the various There are no specific provisions regarding facilitating or ‘grease’ payments. states of the federation, in the Federal Criminal Code and in specific leg- Nevertheless, any material benefit given to public officials in Nigeria is islation that created the anti-corruption agency, the Independent Corrupt prohibited. This prohibition appears not to have been enforced at any time Practices Commission (ICPC). The legislation is uniform in prohibiting the during the past 40 years, however. corrupt giving of any property or benefit to public officers, or to any other person. It is conceivable that this latter provision could also be used to deal 7 Payments through intermediaries or third parties with the bribing of foreign public officials. Whether such an attempt would In what circumstances do the laws prohibit payments through succeed remains to be seen as the courts have yet to consider the matter. intermediaries or third parties to foreign public officials? Conviction of the offence of bribery carries a sentence of up to seven years’ imprisonment. In addition, corruptly promising to give or attempting to Payments to any person for corrupt purposes, whether directly or through give benefits to domestic public officials carries a sentence of up to seven third parties, are prohibited under Nigerian law. years’ imprisonment upon conviction. 8 Individual and corporate liability Foreign bribery Can both individuals and companies be held liable for bribery 3 Legal framework of a foreign official? Describe the elements of the law prohibiting bribery of a Individuals and companies can be held liable for bribery. foreign public official. 9 Civil and criminal enforcement Nigerian law does not specifically prohibit bribery of a foreign public offi- cial. The prohibition against bribery, to the effect that ‘any person who cor- Is there civil and criminal enforcement of your country’s ruptly gives, confers or procures any property or benefit of any kind to, on foreign bribery laws? or for any person is guilty of an offence’, also applies to persons other than To date, the criminal enforcement of bribery laws in Nigeria has been public officials. Consequently, the giving of material benefit to any person, sporadic and largely ineffective. whether or not that person is a public official, for ‘corrupt’ purposes is an With regard to civil proceedings, theoretically it would be possible for offence. The legislation further provides that, in specified circumstances, persons injured as a result of such bribery to institute proceedings against the material benefit is, unless the contrary is proved, ‘deemed to have been bribe givers and takers, founded in tort, equitable tracing and constructive given corruptly.’ Thus, Nigerian laws prohibit all bribery and do not distin- trusts. guish between domestic and foreign public officials. 10 Agency enforcement 4 Definition of a foreign public official What government agencies enforce the foreign bribery laws How does your law define a foreign public official? and regulations? Nigerian law contains no specific provisions relating to public officials and, The agency specifically empowered to enforce anti-bribery laws in Nigeria consequently, there is no definition of a foreign public official. A public is the ICPC. In addition, the Economic and Financial Crimes Commission official is described as: www.gettingthedealthrough.com 143 NIGERIA Sofunde, Osakwe, Ogundipe & Belgore
(EFCC) is at the forefront of efforts to stamp out corruption locally. The Financial record keeping prosecutions embarked upon by the EFCC have, however, tended to be 17 Laws and regulations based on anti-money-laundering and anti-fraud provisions rather than anti-bribery. Additionally, the Nigerian police force is empowered to What legal rules require accurate corporate books and records, enforce the laws. It was the ineffectiveness of the police that made it neces- effective internal company controls, periodic financial sary for the other agencies to be established. The perception appears to be statements or external auditing? that the EFCC is the more vigorous agency. The ICPC, although empow- ered to investigate and prosecute, has not distinguished itself as a particu- The legislation regulating the conduct of joint stock corporations regulates larly effective agency. the keeping of corporate books and records. In addition, banks and cer- tain other financial institutions are subject to additional regulation under 11 Leniency separate legislation, as are companies listed on, or trading on, the Nigerian Stock Exchange. Is there a mechanism for companies to disclose violations in exchange for lesser penalties? 18 Disclosure of violations or irregularities At present, there is no formal mechanism in place in Nigeria for companies To what extent must companies disclose violations of anti- to disclose violations in exchange for lesser penalties. bribery laws or associated accounting irregularities?
12 Dispute resolution There are no provisions that require companies to disclose violations of anti-bribery laws. There are provisions that require banks or their auditors Can enforcement matters be resolved through plea to report violations under the legislation regulating banking in Nigeria. agreements, settlement agreements, prosecutorial discretion or similar means without a trial? 19 Prosecution under financial record keeping legislation Enforcement matters can be resolved through plea agreements, settle- Are such laws used to prosecute domestic or foreign bribery? ment agreements, prosecutorial discretion or similar means. The use of Financial record keeping laws have not been used to prosecute domestic such methods is, however, in its infancy in Nigeria and there is no formal or foreign bribery. framework regulating these procedures. 20 Sanctions for accounting violations 13 Patterns in enforcement What are the sanctions for violations of the accounting rules Describe any recent shifts in the patterns of enforcement of the associated with the payment of bribes? foreign bribery rules. There are no accounting laws or regulations specifically associated with There are no specific laws prohibiting bribery of foreign officials. The pro- the payment of bribes. visions capable of being employed to punish the bribery of foreign officials have very rarely been employed in the fight against the bribery of local offi- 21 Tax-deductibility of domestic or foreign bribes cials. Accordingly, the pattern of enforcement is that there is no enforce- ment to speak of. Developments since the elections of 2007 suggest that Do your country’s tax laws prohibit the deductibility of the current federal government does not view official corruption in the domestic or foreign bribes? same manner as that in place between 1999 and 2007. Bribery, in any form, is prohibited under Nigerian law. Consequently, bribes are not deductible expenses for tax purposes. Needless to say, if 14 Prosecution of foreign companies such payments are made they are unlikely to be so described and are usu- In what circumstances can foreign companies be prosecuted ally hidden under other heads of expenditure. for foreign bribery? Domestic bribery If it can be established that a foreign company committed a criminal act within Nigeria (acts done within Nigeria by individuals who can properly 22 Legal framework be described as the ‘operating minds’ of the foreign company), then there Describe the individual elements of the law prohibiting bribery would be no obstacle, in theory, to the prosecution in Nigeria of that for- of a domestic public official. eign company. Of course, there would be a number of practical problems in pursuing such a prosecution. It would not naturally follow that the action of A public official who seeks or receives any material benefit for him or -her the Nigerian subsidiary of a foreign company could create criminal liability self or for any other person or who agrees or attempts to receive such mate- in Nigeria in the foreign company. rial benefit on account of any action taken by him or her that is connected with the discharge of his or her official functions is guilty of corruption. 15 Sanctions Similarly, any person who gives or offers to give a public official a material What are the sanctions for individuals and companies violating benefit on account of any action to be taken by the public official in his or the foreign bribery rules? her official capacity is guilty of corruption. In both instances, the material benefit is presumed to have been offered or received corruptly, shifting the There are no specific prohibitions against bribing foreign officials. burden of proving otherwise onto the accused. Nevertheless, the provision capable of enabling the prosecution of persons bribing or seeking to bribe foreign officials stipulates a term of imprison- 23 Prohibitions ment of up to seven years. This provision enables the court to impose fines Does the law prohibit both the paying and receiving of a bribe? in lieu of imprisonment and such a sanction would be imposed upon a company convicted of violating the provision. As the legislation does not As indicated above, the law prohibits both the paying and receiving of a make any provision for a maximum fine, it would appear that, in theory, bribe. there is no limit on the fine that could be imposed. 24 Public officials 16 Recent decisions and investigations How does your law define a public official and does that Identify and summarise recent landmark decisions or definition include employees of state-owned or state- investigations involving foreign bribery. controlled companies? In the absence of laws prohibiting the bribery of foreign officials, there are As indicated earlier, a domestic public official is described as ‘a person no decisions or investigations upon which to report. employed or engaged in any capacity in the public service of the Federation, State or Local Government, public corporations or private company wholly or jointly floated by a government or its agency including the subsidiary of
144 Getting the Deal Through – Anti-Corruption Regulation 2015 Sofunde, Osakwe, Ogundipe & Belgore NIGERIA any such company whether located within or outside Nigeria and includes 28 Private commercial bribery judicial officers serving in Magistrate or Customary Courts or Tribunals’. Does your country also prohibit private commercial bribery? Accordingly, the definition covers employees of state-owned and state-controlled companies. There are prohibitions in the legislation dealing with official corruption that prohibit the giving of material benefits to ‘any person’. It is possible 25 Public official participation in commercial activities that such provisions could be employed to prosecute instances of bribery not involving government officials. In addition, there are provisions that Can a public official participate in commercial activities while make criminal the receipt of secret commissions by agents. serving as a public official? Public officials are permitted to hold interests in joint-stock companies and 29 Penalties and enforcement to ‘engage in farming’. Apart from the foregoing, all full-time public offi- What are the sanctions for individuals and companies violating cials are prohibited from participating in the ‘management or running of the domestic bribery rules? any private business, profession or trade’. Persons convicted of bribery offences are liable to fines and to a term of 26 Travel and entertainment imprisonment of between five and seven years. The legislation does not stipulate any maximum fine. Describe any restrictions on providing domestic officials with gifts, travel expenses, meals or entertainment. Do the 30 Facilitating payments restrictions apply to both the providing and receiving of such benefits? Have the domestic bribery laws been enforced with respect to facilitating or ‘grease’ payments? The anti-bribery laws contain no specific provisions relating to this. However, all material benefits given to public officials are prohibited and, Domestic bribery laws have not been enforced with respect to facilitating in certain situations, it is presumed that the benefit was given for corrupt or ‘grease’ payments. purposes, placing the burden of proving otherwise on the recipient or the giver. There has been little or no enforcement of these provisions and no 31 Recent decisions and investigations guidelines are available as to the extent of what is permissible. Identify and summarise recent landmark decisions and investigations involving domestic bribery laws, including any 27 Gifts and gratuities investigations or decisions involving foreign companies. Are certain types of gifts and gratuities permissible under your In February 2014 the federal government of Nigeria preferred several domestic bribery laws and, if so, what types? counts of stealing against the son of a former head of state in connection All material benefits received by a public official in Nigeria are presumed to with the theft of US$2.6 billion from the Nigerian Treasury between 1995 have been corruptly received. and 1998. In June 2014, the charges were withdrawn. No reasons were given for the decision to withdraw the charges.
Babajide O Ogundipe [email protected] Chukwuma Ezediaro [email protected]
7th Floor, St Nicholas House Tel: +234 1 462 2502 Catholic Mission Street Fax: +234 1 462 2501 PO Box 80367, Lafiaji [email protected] Lagos www.sooblaw.com Nigeria
www.gettingthedealthrough.com 145 NORWAY BDO AS
Norway
Erling Grimstad BDO AS
1 International anti-corruption conventions Foreign bribery To which international anti-corruption conventions is your 3 Legal framework country a signatory? Describe the elements of the law prohibiting bribery of a Norway is a signatory to the following anti-corruption conventions: foreign public official. • the OECD Convention on Combating Bribery of Foreign Public According to the Penal Code section 276a, the offence of giving a bribe Officials in International Business Transactions, 17 December 1997; (active bribery) is consummated when a person offers or gives any foreign • the Council of Europe Convention on Laundering, Search, Seizure and public official an improper advantage in connection with the position, Confiscation of the Proceeds from Crime, 8 November 1990; office or assignment. The offence of receiving a bribe (passive bribery) is • the Council of Europe Criminal Law Convention on Corruption, consummated when a foreign public official for himself or others requests 27 January 1999; or receives an improper advantage, or accepts an offer thereof, in connec- • the Council of Europe Civil Law Convention on Corruption, 4 November tion with the position, office or assignment. 1999; The party giving or offering a bribe may be a legal entity or a physical • the Council of Europe Additional Protocol of Criminal Law Convention person. The improper advantage must be requested, received, promised, on Corruption, 15 May 2003; given or offered in connection with the position, office or assignment. The • the Agreement on Establishing the Group of States Against Corruption terms ‘position’, ‘office’ and ‘assignment’ are intended to include all types (GRECO); of employment, office or assignment for public and private employers and • the UN Convention against Transnational Organized Crime, 15 principals, regardless of position. It is clearly expressed in section 276a, November 2000; and second paragraph and section 276c, second paragraph, that position, office • the UN Convention against Corruption, 31 October 2003. or assignment also denotes position, office or assignment of a foreign public official. 2 Foreign and domestic bribery laws It is not a prerequisite for criminal conduct that the advantage has had Identify and describe your national laws and regulations any influence in the making of a decision. prohibiting bribery of foreign public officials (foreign bribery The bribe may be directly given to the receiver, or provided through laws) and domestic public officials (domestic bribery laws). an intermediary. Trading in influence is corruption according to the Penal Code section The Norwegian Penal Code chapter 26, sections 276a, 276b and 276c 276c, and encompasses position, office or assignment in a foreign country, incorporated in July 2003, applies to foreign and domestic bribery, both including a foreign public official. within the public and the private sectors. Offering or providing bribes The courts will decide what constitutes an undue or improper advan- (active bribery) as well as requesting or receiving bribes (passive bribery) tage in every case. Ordinary gifts of representation, promotional effects, is an offence under section 276b. The influencing of conduct of any posi- and so on will typically not be seen as undue or improper advantages. The tion, office or assignment by offering or requesting an improper advantage court’s decisions will mainly be based on factors such as: is an offence according to section 276c (trading in influence). • the objective of the offer; A bribe is described as an improper advantage in connection with a • the position of the person offering or receiving the advantage; position, office or assignment. An offer or a payment may be deemed • the value of the advantage in question; improper by the courts based on several criteria or factors, including the • the nature of the advantage; objective of the offer, the position of the person offering or receiving the • the level of transparency in place; and advantage, the value or the nature of the advantage in question, the level of • whether the act is contrary to the ethical rules or organisational guide- transparency in place, and whether it is an act contrary to the ethical rules lines, etc, for that office, assignment or position. for that office, assignment or position. The regulations apply to all types of employment, office or assignment To constitute an offence, the act must be clearly censurable according to for both public and private employers and principals, irrespective of posi- the legislative background of the named sections in the Norwegian Penal tion. The Norwegian Penal Code does not distinguish between bribery of a Code. foreign public official and bribery of a domestic public official. In addition to these provisions in the Norwegian Penal Code, the 4 Definition of a foreign public official Norwegian Civil Service Act Chapter 3, section 20 prohibits civil servants from accepting a gift, commission, service or other payment that is likely, How does your law define a foreign public official? or which by the donor is intended, to influence his or her official actions, Norwegian anti-corruption legislation does not distinguish between foreign or of which regulations forbid the acceptance. Acts of corruption may also and domestic public officials, and covers all types of employment, office or violate a number of other sections in the Penal Code and other civil laws assignment for public and private employers and principals, irrespective including the Working Environment Act, Bookkeeping Act, Taxation Act of position. and the Public Procurement Act. In the public sector, the receiver may be: • a person who exercises public authority; • a member of a directorate, administration, board, committee or other public body, a municipality, religious society or social insurance office; • a member of the armed forces;
146 Getting the Deal Through – Anti-Corruption Regulation 2015 BDO AS NORWAY
• a judge or other official in a Norwegian or international court; Section 48a, paragraph 3 establishes that the penalty shall be a fine. • anyone who exercises an arbitral assignment; or The enterprise may also, by a court judgment, be deprived of the right to • ministers, cabinet members and members of parliament. exercise business, or exercise business in certain forms.
The above list is not exhaustive. 9 Civil and criminal enforcement Is there civil and criminal enforcement of your country’s 5 Travel and entertainment restrictions foreign bribery laws? To what extent do your anti-bribery laws restrict providing foreign officials with gifts, travel expenses, meals or Criminal enforcement As previously mentioned, corruption constitutes a criminal offence pursu- entertainment? ant to the Norwegian Penal Code sections 276a, 276b and 276c. Cases of Foreign officials are subject to the same restrictions as domestic officials. corruption are investigated by the police and prosecuted by the Norwegian Norwegian anti-corruption legislation does not clearly restrict pro- prosecution authorities. The perpetrator may be sentenced to prison for a viding foreign or domestic officials with gifts, travel expenses, meals or term not exceeding three years. Gross corruption is punishable by impris- entertainment (advantages). The advantage falls within the scope of the onment for a term not exceeding 10 years. Norwegian Penal Code if it is to be considered improper. As indicated in question 3, there are no minimum levels for when Civil enforcement an advantage is deemed improper. Even an offer of an advantage with There is no public body conducting civil enforcement in Norway. no monetary value may represent an improper advantage according to However, in accordance with the Norwegian Act relating to compensa- the Norwegian Penal Code. Whether or not the advantage is improper tion in certain circumstances, anyone who has suffered damage as a result depends on the circumstances in each case, and the factors mentioned in of corruption can, through civil damages action, claim compensation from question 4. However, small gifts of representation and promotional effects the person who with intent or negligence is responsible for, or has abetted, are generally accepted. the corruptive act. Compensation may also be claimed from the perpetrator’s employer if 6 Facilitating payments the corrupt act has occurred in connection with the perpetrator’s execution Do the laws and regulations permit facilitating or ‘grease’ of work, unless the employer proves that every reasonable precaution has payments? been taken to prevent corruption. It is statutory that the compensation shall cover the claimant’s financial In principle, facilitating payments are to be understood as improper advan- losses. Compensation can be claimed regardless of whether an individual tages according to the Norwegian Penal Code section 276a. There is no is sentenced for the corruptive act. Provided that the perpetrator or his or exception for grease payments. It is the requesting, receiving, promising, her employer are Norwegian residents, the legislation similarly applies to giving or offering of an improper advantage that constitutes an offence. corruptive acts committed abroad, or situations where the damage occurs Whether facilitating payments are considered to be improper advantages abroad. according to the Norwegian Penal Code, must be individually assessed in each situation. 10 Agency enforcement In the preparatory works of the Norwegian Penal Code, it is stated that What government agencies enforce the foreign bribery laws some situations prevent facilitating payments from being characterised and regulations? as improper, for example in a situation where there is risk of extortion. It refers to situations such as where one considers oneself forced to pay a Cases of corruption are prosecuted by the Norwegian Public Prosecution foreign public official a smaller amount to reclaim one’s passport, or to be Authority and investigated by the Norwegian police. The National Authority permitted to leave the country. To consummate an offence, the act must be for Investigation and Prosecution of Economic and Environmental Crime clearly censurable. in Norway (ØKOKRIM) investigates and prosecutes the most complex and severe violations of the provisions in the Penal Code sections 276a, 276b 7 Payments through intermediaries or third parties and 276c. ØKOKRIM is both a police specialist agency and a public pros- In what circumstances do the laws prohibit payments through ecutor’s office with national authority. Within the ordinary police force, in intermediaries or third parties to foreign public officials? several police districts, there are specific law enforcement teams or task forces consisting of financial crime and white-collar crime experts. These Payments to foreign officials through intermediaries or third parties fall expert teams investigate and prosecute cases of financial crime, including within the scope of the Norwegian anti-bribery legislation, and constitute bribery. an offence. Any person who aids or abets such an offence as mentioned in the Norwegian Penal Code chapter 26, sections 276a, 276b and 276c, shall 11 Leniency be liable to the same penalty. Is there a mechanism for companies to disclose violations in A person who is not regarded as the perpetrator may, if he or she exchange for lesser penalties? induced another to commit the crime, be sentenced for instigating or aid- ing the crime. There is no legal mechanism for companies to disclose violations in Section 276c prohibits trading in influence, which is described as giv- exchange for lesser penalties, although the Public Prosecution Authority ing, offering, requesting or receiving an improper advantage, or accepting has made it clear that they encourage self-reporting of violations. The dis- an offer thereof, in return for influencing the conduct of any position, office closure of violations may influence the Prosecution Authority’s decision of or assignment. whether to bring an enforcement action and the penalty given as a fine.
8 Individual and corporate liability 12 Dispute resolution Can both individuals and companies be held liable for bribery Can enforcement matters be resolved through plea of a foreign official? agreements, settlement agreements, prosecutorial discretion Companies, as well as individuals, can be held liable for bribery according or similar means without a trial? to the Norwegian Penal Code. There is no legal mechanism for plea agreements or settlement agree- According to the Norwegian Penal Code chapter 3a, section 48a, an ments. However, enforcement for minor offences can be resolved both for enterprise can be subject to penalty if a penal provision is contravened by individuals and for legal persons by accepting a fine given by the prosecu- a person who has acted on behalf of the enterprise. This applies even if no tion authority. According to the Criminal Procedure Act chapter 18, section individual person can be punished for the infringement. 248, enforcement matters can, in specific cases, also be resolved without a In this respect, the term ‘enterprise’ denotes a company, society or full trial. Depending on the prosecuting authority application, and with the other association, sole proprietorship, foundation, estate or public activity. consent of the individual charged, the district court may adjudicate a case without an indictment and main hearing. This may occur when the court www.gettingthedealthrough.com 147 NORWAY BDO AS does not find this questionable, when the case concerns a criminal act that of the Norwegian Penal Code section 276a. In 2003, Norconsult AS and is not punishable by imprisonment for a term exceeding 10 years, and two foreign companies entered into a contract with the local water and when the person charged has made an unreserved confession in court that sanitation agency (DAWASA) in Dar es Salaam, Tanzania, to upgrade the is corroborated by other evidence. The National Contact Point contributes city’s water and sewerage system. One of the conditions for being awarded to resolving conflicts of alleged violations of the OECD Guidelines, includ- the contract was that 5 per cent of the total contract value would be paid ing allegations of corruption. to a group of DAWASA officials. The prosecuting authority suspects that a total of approximately US$100,000 was paid in bribes. Norconsult AS 13 Patterns in enforcement was fined 4 million Norwegian kroner by ØKOKRIM, which the company Describe any recent shifts in the patterns of enforcement of the refused to accept. The prosecution trial took place in the Oslo District Court in May 2011, and in July the three employees were found guilty of foreign bribery rules. corruption and sentenced to imprisonment. A corporate penalty was not The Norwegian anti-corruption legislation is strict and goes beyond imposed on Norconsult AS by the court. The verdict was appealed, and the minimum requirements set by the Council of Europe Criminal Law in October 2012 the Appeal Court found Norconsult AS to be in violation Convention on Corruption, 27 January 1999, as bribes between private of Penal Code section 276a. The fine of 4 million kroner was upheld and companies are also considered an offence in Norway. appealed to the Supreme Court. The individuals indicted were acquitted of Norway has experienced an increase in the number of investigated violation of the Penal Code section 276a. The Supreme Court decided not corruption cases, both in the private and public sector, since the new anti- to fine Norconsult AS. The majority in the Supreme Court found that the corruption legislation came into force in 2003. From 2003 to 2013 approxi- severity of the case and Norconsult AS’s lack of guidelines, instructions, mately 35 major corruption cases were investigated, resulting in convictions training and control clearly indicated that a corporate penalty should be for companies and individuals in Norwegian courts. imposed. However, the majority found that the timeframe for the inves- There appears to be lack of financial resources and expertise within tigation and the prosecution, the efforts made by the company to prevent the police force and prosecution office to adequately investigate all cases of future corruption and the consequences already suffered by the company allegations of bribery and gross corruption. The number of staff specialis- were such that Norconsult was acquitted. ing in investigation and prosecution is very limited. The consequences are In 2013 there were several major and complex cases of international likely to be a more restrictive approach to reports of alleged corruption by corruption under investigation by ØKOKRIM. The Norwegian shipping the police as they have limited skilled and trained resources to investigate company Cabu Chartering AS was fined 20 million kroner by ØKOKRIM corruption in various parts of both private and public sector. in 2014 for bribery paid for a freight agreement with Aluminium Bahrain In practice the first and initial suspicion of corruption in many cases (Alba). comes from whistle-blowers who are employed in the company involved in In early 2014, the Norwegian chemical company Yara was fined 295 the alleged corruption. A number of cases of corruption investigated by the million kroner for on account of bribery committed abroad. The bribes police appear to originate from whistle-blowers. Norwegian law concern- in question were made to the parent company of an international group ing the protection of whistle-blowers (Chapter 4, sections 3 to 6 of the Act with in excess of 8,000 employees worldwide. The alleged bribes, made relating to the Working Environment, Working Hours and Employment in the period 2004 to 2009 and totalling approximately US$12 million, Protection, etc) requires any enterprise to establish a whistle-blowing were made to high-ranking government officials both in Libya and India, system. Employees who report censurable conditions are protected from as well as to a supplier in Russia. Yara accepted the fine in January of 2014. retaliation by law. The protection of whistle-blowers has increased the like- ØKOKRIM has, in addition, brought charges against four former Yara lihood of reporting suspicions of corruption and resulted in a heightened executives associated with the company during the time the alleged brib- number of cases of corruption subject to prosecution. ery took place. The court case commenced in January 2015. As an example the Norwegian Ministry of Foreign Affairs, the Norwegian Agency for Development Cooperation (NORAD) and the Financial record keeping Norwegian Peace Corps have developed a whistle-blowing system allow- 17 Laws and regulations ing anyone who has information of alleged corruption to report suspicion through both internal reporting lines and an external partner. What legal rules require accurate corporate books and records, effective internal company controls, periodic financial 14 Prosecution of foreign companies statements or external auditing? In what circumstances can foreign companies be prosecuted The primary relevant laws and regulations are: for foreign bribery? • the Bookkeeping Act; The Penal Code does not allow for the Norwegian prosecution authorities • the Accounting Act; to prosecute foreign companies for foreign bribery. • the Taxation Act; However, a foreigner (physical person) violating the Penal Code sec- • the Partnerships Act (concerning unlimited liability partnerships and tions 276a, 276b or 276c abroad is subject to prosecution in Norway. This limited partnerships); provision is rarely used. • the Money Laundering Act (on measures to combat the laundering of proceeds, etc); 15 Sanctions • the Limited Liability Companies Act; • the Public Limited Liability Companies Act; and What are the sanctions for individuals and companies violating • the Auditors Act. the foreign bribery rules? 18 Disclosure of violations or irregularities Individuals violating the Penal Code sections 276a, 276b or 276c may be sentenced to a fine or imprisonment for a term not exceeding three years. To what extent must companies disclose violations of anti- Gross corruption is punishable by imprisonment for a term not exceeding bribery laws or associated accounting irregularities? 10 years. As mentioned in question 8, companies violating the corruption regu- According to Norwegian law, there is no such legal obligation for Norwegian lations may be punishable by a fine, and by a court judgment the enterprise companies. may also be deprived of the right to exercise business, or exercise business in certain forms. 19 Prosecution under financial record keeping legislation Are such laws used to prosecute domestic or foreign bribery? 16 Recent decisions and investigations No. Any criminal offence of foreign bribery will be prosecuted according to Identify and summarise recent landmark decisions or the Penal Code sections 276a, 276b and 276c. investigations involving foreign bribery. In autumn 2009, ØKOKRIM indicted three employees of Norconsult AS, the largest consulting engineering company in Norway, for contravention
148 Getting the Deal Through – Anti-Corruption Regulation 2015 BDO AS NORWAY
20 Sanctions for accounting violations 26 Travel and entertainment What are the sanctions for violations of the accounting rules Describe any restrictions on providing domestic officials associated with the payment of bribes? with gifts, travel expenses, meals or entertainment. Do the restrictions apply to both the providing and receiving of such There are no specific sanctions for violations of accounting rules associated with the payment of bribes. Any violation of accounting rules is a criminal benefits? offence according to the legal offence set out in the accounting rules. Public officials are subject to the same restrictions as foreign officials. See question 5. 21 Tax-deductibility of domestic or foreign bribes Do your country’s tax laws prohibit the deductibility of 27 Gifts and gratuities domestic or foreign bribes? Are certain types of gifts and gratuities permissible under your Yes. The Taxation Act sections 6 to 22 states that bribes or other advantages domestic bribery laws and, if so, what types? given for wrongful supply of services are not deductible. There is no legislation that expressly allows for certain types of rewards or advantages. As mentioned in questions 3 and 5, any advantage requested, Domestic bribery received, promised, offered or given must represent an undue advantage 22 Legal framework to constitute an offence. Not all advantages will be regarded as representing an undue advan- Describe the individual elements of the law prohibiting bribery tage. Small gifts of representation, promotional effects, etc do not gener- of a domestic public official. ally constitute a violation of the Norwegian corruption legislation. One must consider the facts in each case to determine whether the gift in ques- The Norwegian corruption legislation does not distinguish between for- tion represents an undue advantage. Thus, in some cases, even small gifts eign public officials and domestic public officials. See question 3. may constitute an offence as the monetary value of the gift in question is not vital to determine whether the gift represents a criminal offence. 23 Prohibitions Does the law prohibit both the paying and receiving of a bribe? 28 Private commercial bribery Yes. See question 3. Does your country also prohibit private commercial bribery? An offence is committed if a bribe is offered orally or in writing. It is Yes. Norwegian corruption regulations apply to both the public and private also consummated if such an offer is accepted or if the offender asks for sectors. a bribe. The formation of an oral contract that includes bribes constitutes an offence. 29 Penalties and enforcement 24 Public officials What are the sanctions for individuals and companies violating How does your law define a public official and does that the domestic bribery rules? definition include employees of state-owned or state- Companies, as well as individuals, can be held liable for bribery according controlled companies? to the Norwegian Penal Code. According to the Norwegian Penal Code Chapter 3a, section 48a, an Owing to the fact that the Norwegian corruption legislation covers all types enterprise can be subject to penalty if a penal provision is contravened by of employment, office or assignment for public and private employers and a person who has acted on behalf of the enterprise. This applies even if no principals, there is no definition of a ‘public official’ within the framework individual person may be punished for the contravention. In this respect, of the Penal Code. the term ‘enterprise’ denotes a company, society or other association, sole In accordance with this, employees of state-owned or state-controlled proprietorship, foundation, estate or public activity. companies are subject to the legislation. Section 48a paragraph 3 establishes that the penalty shall be a fine. The enterprise may also, by a court judgment, be deprived of the right to exer- 25 Public official participation in commercial activities cise business, or exercise business in certain forms. Can a public official participate in commercial activities while Individuals violating the Penal Code, section 276a, 276b or 276c may serving as a public official? be sentenced to a fine or imprisonment for a term not exceeding three years. Gross corruption is punishable by imprisonment for a term not Yes. A public official is entitled to be involved in commercial activities as exceeding 10 years. long as the public official fulfils impartiality requirements.
Erling Grimstad [email protected]
Munkedamsveien 45 Tel: +47 23 11 91 00 / +47 997 97 542 PO Box 1704 Vika Fax: +47 23 11 91 01 0121 Oslo www.bdo.no Norway
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30 Facilitating payments were investigated, resulting in convictions for companies and individuals Have the domestic bribery laws been enforced with respect to in Norwegian courts. These cases involve both the public and private sec- tors. The most serious case of corruption in Norway to date concerns the facilitating or ‘grease’ payments? managing director of a publicly owned waterworks outside Oslo, supplying Facilitation payments or grease payments are not exempt under the water and sewerage systems to a population of over 130,000. Following Norwegian Penal Code. The law does not distinguish ‘facilitation pay- the verdict, the former managing director was convicted of exploiting his ments’ from other bribes. Whether the offer or payment constitutes an position to gain significant economic benefits and was sentenced to seven undue advantage and something the recipient is not lawfully entitled to years and six months’ imprisonment. accept or receive is determined in a court of law. Advantages permitted by law or by administrative rules, minimum gifts, gifts of very low value or socially acceptable gifts are accepted.
31 Recent decisions and investigations Identify and summarise recent landmark decisions and investigations involving domestic bribery laws, including any investigations or decisions involving foreign companies. The recent decision to be mentioned are the cases briefly described in question 16. From 2003 to 2013 approximately 35 major corruption cases
150 Getting the Deal Through – Anti-Corruption Regulation 2015 Orihuela Abogados | Attorneys at Law PERU
Peru
Sandra Orihuela Orihuela Abogados | Attorneys at Law
1 International anti-corruption conventions Foreign bribery To which international anti-corruption conventions is your 3 Legal framework country a signatory? Describe the elements of the law prohibiting bribery of a Peru has signed and ratified the following conventions: foreign public official. • Inter-American Convention against Corruption, ratified in 1997; Pursuant to article 397-A of the Criminal Code, bribery of a foreign public • United Nations Convention against Corruption, ratified in 2004; and official or servant by a civilian is a crime. The elements of this crime are • United Nations Convention against Transnational Organized Crime as follows: and its Protocols (Trafficking in Persons, Smuggling of Migrants and • a person who, Trafficking of Firearms), ratified in 2002. • by any means, offers, gives, or promises directly or indirectly, • to a public official or servant from a different state or to an interna- Peru intends to become a party to the OECD Convention on Combating tional public organisation official, Bribery of Foreign Public Officials in International Business Transactions • a donation, promise, advantage or wrongful benefit, (the OECD Convention), and for such purpose it has been amending its • that results in one’s own or a third person’s benefit, legislation in order to satisfy the requirements thereunder. In December • so that the public official or servant performs or omits to perform 2014, Peru and the OECD launched the Peru Country Programme, which actions inherent to his position or duties, in violation of his obligations has as its objective improving the quality of public policies and services or without defaulting on his obligations, that Peru offers its citizens in areas including decentralisation, governance, • to obtain or to retain business or another wrongful advantage in anti-corruption, health, education, labour, environmental management, connection with international economic or commercial activities. competence, investments and tax policies. 4 Definition of a foreign public official 2 Foreign and domestic bribery laws How does your law define a foreign public official? Identify and describe your national laws and regulations prohibiting bribery of foreign public officials (foreign bribery The Criminal Code does not provide a definition of foreign public officials laws) and domestic public officials (domestic bribery laws). or servants or international public organisation officials. However, article 19.10 of the anti-corruption section of the Peru– Peru’s Criminal Code (the Criminal Code) provides that bribery of foreign United States Trade Promotion Agreement defines foreign officials, public and domestic public officials or servants is a crime. The Criminal Code was functions and public officials as follows: approved by Legislative Decree No. 635 in April 1991, and regulates these • foreign official: any person holding a legislative, administrative, or crimes in Title XVIII, ‘Crimes against the Public Administration’. judicial office of a foreign country, at any level of government, whether appointed or elected; any person exercising a public function for a for- Domestic bribery eign country at any level of government, including for a public agency Crimes against the public administration include crimes that are perpe- or public enterprise; and any official or agent of a public international trated with the participation of public officials or servants (see question organisation; 24), whether they take any action towards requesting a benefit, or passively • public function: any temporary or permanent, paid or unpaid activity, accept or receive a benefit. Crimes of corruption of public officials or serv- performed by an individual on behalf of a party (ie, Peru or the United ants are divided into passive bribery, where the offender is a public official States) or in the service of a party, such as procurement, at the central or servant, and active bribery where the offender is not a public official or level of government; or servant but a civilian instead. Active bribery of domestic public officials or • public official: any official or employee of a party at the central level of servants is regulated in article 397 of the Criminal Code, and the bribery of government, whether appointed or elected. certain domestic officials (such as a public prosecutor, arbitrator or magis- trate) is regulated in article 398. According to Peru’s Constitution, treaties or agreements entered into by the state that are in force become part of Peru’s national laws. Contrastingly, Foreign bribery Law 30124 published 22 December 2013 modified the definition of ‘domes- In January 2009, Law No. 29316 was enacted to incorporate and regulate tic public official’ in the Criminal Code by amending its article 425. various provisions of different Peruvian laws, in order to be able to imple- ment the Peru–United States Trade Promotion Agreement (in force since 5 Travel and entertainment restrictions February 2009). As a result, article 397-A incorporated into the Criminal To what extent do your anti-bribery laws restrict providing Code the offence of ‘transnational active bribery’, regulating bribery of public officials or servants from other states, as well as officials of interna- foreign officials with gifts, travel expenses, meals or tional public organisations. entertainment? There is no specific provision in Peru’s Criminal Code regarding gifts, travel expenses, meals or entertainment. However, article 397-A of the Criminal Code prohibits the offering, giving or promising of a donation, promise, advantage or wrongful benefit in general, to a foreign public official or servant or to an international public organisation official; to the www.gettingthedealthrough.com 151 PERU Orihuela Abogados | Attorneys at Law extent that they are offered, given or promised so that the public official or Although companies are not subject to criminal liability, they may be servant performs or omits to perform actions inherent to his position or considered a third-party obligor and thus pay civil damages arising from duties, in violation of his obligations or without defaulting on his obliga- a crime. In addition, companies may be subject to certain administrative tions, in order to obtain or retain a business or another wrongful advan- sanctions when a crime is perpetrated carrying out the corporate mission tage in connection with international economic or commercial activities. of a corporation or using its organisation to help or conceal criminal activ- In addition, article 8 of the Law of Ethics in Civil Service (Law No. 27815) ity, provided that an individual connected to the corporation is found guilty regulates the ethical prohibitions in civil service, providing that a public of the crime. In these cases, the criminal judge may apply any or all of the official or servant is prohibited from obtaining or seeking benefits or undue following accessory administrative sanctions: advantages for themselves or others, through the use of their authority, • temporary or permanent closing of the corporate headquarters; position or influence. • dissolution and liquidation; • suspension of corporate activities for a term no longer than two years; 6 Facilitating payments and Do the laws and regulations permit facilitating or ‘grease’ • temporary or permanent prohibition to carry out the corporate mis- sion considered to have helped or concealed a criminal activity (article payments? 105-A). There is no specific provision in Peru’s Criminal Code regarding facilitat- ing payments. However, the Criminal Code generally prohibits the offering, In addition, both individuals and companies may be held liable in civil giving or promising of a donation, promise, advantage or wrongful benefit; courts for negligence or tort actions filed by a plaintiff seeking monetary hence there is no exception permitting facilitating payments. compensation for damage caused in connection with bribery-related crimes, as the case may be. Only the person suffering the relevant damage 7 Payments through intermediaries or third parties has standing to file a claim involving said actions. In what circumstances do the laws prohibit payments through 10 Agency enforcement intermediaries or third parties to foreign public officials? What government agencies enforce the foreign bribery laws Article 397-A of Peru’s Criminal Code penalises the direct or indirect and regulations? bribery of foreign public officials or servants, thereby prohibiting bribery through intermediaries or third parties. All criminal offences, including bribery of foreign public officers, are sub- ject to criminal governmental enforcement by the Prosecutor’s Office, an 8 Individual and corporate liability autonomous constitutional organism that is independent from the judici- ary. In addition, in 2010 the Presidency of the Council of Ministers created Can both individuals and companies be held liable for bribery a high-level Anti-Corruption Commission (approved by Supreme Decree of a foreign official? No. 016-2010-PCM) in order to develop anti-bribery policies, coordinate No. Under Peruvian laws, only individuals may be criminally liable for national efforts to prevent and investigate bribery crimes and promote committing a crime, including the crime of bribery of a foreign official. Peru’s participation in international anti-bribery forums before the UN, Companies are not subject to criminal liability; nonetheless, they may be OECD, OAS and others. Members of different public and private institu- subject to certain administrative sanctions and civil liability in connection tions and civil society comprise the Anti-Corruption Commission. with bribery-related actions, as the case may be. Nevertheless, there are currently two legislative projects aiming 11 Leniency to regulate criminal liability for companies involved in bribery crimes. Is there a mechanism for companies to disclose violations in A first draft bill was approved by the Anti-Corruption Commission in exchange for lesser penalties? December 2013 and presented to Congress on 10 September 2014 during the first ordinary legislation period, under No. 3851/2014-CR Law that There is no disclosure mechanism applicable to companies in exchange for regulates corporate criminal liability and imposes sanctions on legal enti- lesser penalties. ties on corruption matters, which seeks to partially amend article 105 of the Peruvian Criminal Code. Said draft bill is awaiting further approval by 12 Dispute resolution the Congressional Commission of Justice and Human Rights. A second Can enforcement matters be resolved through plea draft bill approved by the Anti-Corruption Commission was presented to agreements, settlement agreements, prosecutorial discretion Congress on 3 December 2014 under No. 4054/2014-PE, Law that regu- or similar means without a trial? lates the autonomous criminal liability for legal entities on corruption crimes. This draft bill aims to impose criminal liability on the legal entity All criminal offences, including bribery of a foreign official, are subject to itself – disassociated from the individual agent’s liability – and would apply a criminal trial and cannot be resolved by way of a settlement or similar to all private legal entities, including non-registered associations, founda- arrangement. tions, and committees, irregular corporations, entities managing funds and government-owned companies involved in corruption crimes set forth in 13 Patterns in enforcement articles 384, 387, 397-A, 398 and 400 of the Peruvian Criminal Code. This Describe any recent shifts in the patterns of enforcement of the draft bill is awaiting further approval by the Congressional Commission of foreign bribery rules. Decentralisation, Regionalisation, Local Governments and Modernisation of Government Management. If approved by their respective congressional In November 2013, article 397-A of the Criminal Code was amended to commissions, the aforementioned draft bills would then be presented before incorporate fines and sanctions applicable to individuals violating foreign Congress for its review and eventual approval or dismissal. bribery rules (see question 9). This amendment was approved in order to fully comply with the United States–Peru Trade Promotion Agreement, the 9 Civil and criminal enforcement bilateral free-trade agreement aiming to eliminate obstacles to trade and Is there civil and criminal enforcement of your country’s foster private investment between both countries. foreign bribery laws? 14 Prosecution of foreign companies Yes. Peru’s Criminal Code provides for criminal and civil enforcement for In what circumstances can foreign companies be prosecuted the bribery of a foreign official applicable to individuals alone, by estab- for foreign bribery? lishing specific bribery-related sanctions such as imprisonment and fines (article 397-A) and, as a general rule, the payment of civil damages to be Peruvian law does not specifically recognise corporate criminal liability. determined by the criminal judge in connection with any crime (article 92) Nevertheless, as described in question 8 above, two draft bills aiming to hold and the forfeiture of assets and profits related to criminal activity (article companies criminally liable for bribery crimes (draft bill No. 3851/2014-CR 102). and draft bill No. 4054/2014-PE) are awaiting further approval by their respective congressional commissions. If approved by the latter, said draft
152 Getting the Deal Through – Anti-Corruption Regulation 2015 Orihuela Abogados | Attorneys at Law PERU bills would then be presented before Congress for its review and eventual 19 Prosecution under financial record keeping legislation approval or dismissal. Are such laws used to prosecute domestic or foreign bribery?
15 Sanctions There is no specific legislation on the subject. What are the sanctions for individuals and companies violating 20 Sanctions for accounting violations the foreign bribery rules? What are the sanctions for violations of the accounting rules Individuals are subject to no less than five and no more than eight years associated with the payment of bribes? of imprisonment and from 365 to 730 ‘penalty days’ for violating foreign bribery rules. There is no specific legislation on the subject. Sanctions imposed as fines or penalties force the convicted felon to pay to the state an amount of money which is expressed in terms of 21 Tax-deductibility of domestic or foreign bribes ‘penalty days’. The amount of a ‘penalty day’ is the average daily income Do your country’s tax laws prohibit the deductibility of of the convicted felon and is determined pursuant to his assets, rents, domestic or foreign bribes? remuneration, level of expenditure and other external signs of wealth. See question 9 for the sanctions applicable to companies. Only expenditure that derives from commercial activity or that is related to the activities of a company or industry is tax-deductible. All bribes, for- 16 Recent decisions and investigations eign and domestic, constitute a crime according to Peru’s Criminal Code, Identify and summarise recent landmark decisions or and as such cannot in anyway be considered tax-deductible, as they derive from illegal activities. investigations involving foreign bribery. Bribery of foreign officials was introduced as a crime in the Criminal Code Domestic bribery enacted in January 2009, as a result of the implementation of the Trade 22 Legal framework Promotion Agreement between Peru and the United States. Owing to its recent introduction, there are no recent landmark decisions involving Describe the individual elements of the law prohibiting bribery foreign bribery. In 2011, however, Peruvian authorities investigated an of a domestic public official. alleged violation of the foreign bribery rules by Alexis Humala, brother of The Criminal Code prohibits the bribery of domestic public officials in Peru’s President Ollanta Humala, during a trip to Russia that year. article 397. The sanctions are higher when the public official takes an Russia’s Minister of Foreign Affairs, Sergey Lavrov, received Alexis action or omits to take an action in violation of his obligations, as opposed Humala, in his capacity as special representative of then President-elect to when he takes an action in furtherance of his public functions. The Ollanta Humala, on 5 July 2011. It is alleged that Alexis Humala not only elements of the offence of bribery of domestic public officials are: exchanged views on general issues relating to the bilateral relationship and • a person who, the international agenda between Russia and Peru, but also negotiated • by any means offers, gives, promises, some form of strategic alliance with the Russian government involving gas • to a public official or servant, projects in Peru with Russian energy companies. • a donation, promise, advantage or benefit, Ollanta Humala’s political party issued an official statement denying • so that the public official or servant does or omits to do something, sending Alexis Humala as a special representative to negotiate business • in the performance of his functions or in violation of them (as with the Russians on behalf of the President-elect or the Peruvian govern- applicable). ment. Following investigations by the District Attorney’s Office into the matter, the claim was closed in December 2012. 23 Prohibitions On 10 December 2014, Dallas Airmotive Inc, a provider of aircraft engine maintenance, repair and overhaul services based in Texas, United Does the law prohibit both the paying and receiving of a bribe? States, admitted violations of the Foreign Corrupt Practices Act and Yes. The Criminal Code not only punishes public officials for soliciting or agreed to pay the US Department of Justice a US$14 million penalty in accepting bribes (article 393 of the Criminal Code), but also punishes the order to resolve charges of bribery to the Peruvian Air Force, among other individual that offers any type of bribe, such as a donation, promise, advan- Latin American government officials. President Ollanta Humala publicly tage or benefit (article 397 of the Criminal Code). More importantly, it is announced that the Comptroller General of the Republic would intervene irrelevant if the action performed or not taken was made in furtherance of and investigate the alleged payments by Dallas Airmotive Inc between the official’s public functions or in violation of them. 2008 and 2012 in order to secure government contracts in Peru. For recent investigations involving domestic bribery, see question 31. 24 Public officials Financial record keeping How does your law define a public official and does that definition include employees of state-owned or state- 17 Laws and regulations controlled companies? What legal rules require accurate corporate books and records, effective internal company controls, periodic financial The definition of public official or servant included in article 425 of the Criminal Code was recently modified by Law No. 30124 published on 13 statements or external auditing? December 2013. Pursuant to the new definition, a public official or servant Up until 2013, only those companies that were listed on the Lima Stock is: Exchange and were supervised by the regulatory body of the stock • an individual who has a career in public administration; exchange were required to keep books and records in compliance with • an individual who holds a political office or a position of trust, includ- the International Financial Reporting Standards (IFRS). During 2013 ing one resulting from a popular election; this requirement was broadened to include all those companies report- • anyone, regardless of the specific labour regime under which he may ing incomes of over 114 million nuevos soles, and for 2014 book-keeping be, as long as he maintains a labour or contractual link of any nature standards according to the IFRS will also be required for companies report- with a government entity or agency, including government-owned ing incomes of over 57 million nuevos soles. For 2015 the requirement will companies or public–private entities within the commercial activities apply for companies reporting incomes of over 11.4 million nuevos soles. of the government, provided his functions are conducted by way of such agencies or entities; 18 Disclosure of violations or irregularities • administrators and custodians of assets that have been seized or deposited by the competent authority, even if such assets belong to To what extent must companies disclose violations of private parties; anti-bribery laws or associated accounting irregularities? • members of the army and national police; There is no specific legislation on the subject.
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• individuals appointed, elected or proclaimed by competent authority hiring offers, and also applies to the spouse and relatives of the public to perform activities or functions on behalf of or at the service of the official. The regulations to Law No. 28024 broaden these prohibitions to state or its entities; and include any involving the extinction of obligations benefiting the public • all others indicated by the Constitution and the law. official or his relatives.
Similarly, Civil Service Law No. 30057, published on 3 July 2013, came 27 Gifts and gratuities into full force and effect in 2014, when three sets of regulations were pub- Are certain types of gifts and gratuities permissible under your lished. The General Regulations of the Civil Service Law, the Regulations domestic bribery laws and, if so, what types? of the Special Regime for Local Government, and the Compensation Regulations were published. The General Regulations regulate the rights, There is no specific provision on permissible gifts and gratuities under obligations, training, evaluation, collective and other rights of public Peru’s Criminal Code. All bribes, foreign and domestic, constitute a crime servants. The local government regulations regulate municipalities with according to the Criminal Code. However, Law No. 28024 applicable to fewer than 20 people. The Civil Service Law refers to civil servants in domestic and foreign lobbyists specifically provides that none of the fol- the following groups: public official, public director, career civil servant lowing is considered a prohibited ‘generosity’ to a public official: and civil servant in complementary activities. It also includes civil serv- • contributions of legal origin in favour of electoral campaigns, pursuant ants in all entities, regardless of their governing body, whose rights are to applicable legislation; regulated by Legislative Decree 276 (Base Law of Administrative Careers • donations and bequests in favour of government entities; and Public Sector Remuneration); Legislative Decree 728 (Law of Labour • informational materials related to the party on whose behalf the Productivity and Competition); Special Careers in accordance with the lobbying is undertaken, delivered to the offices of public officials such Civil Service Law; those hired pursuant to Legislative Decree 1057 (special as books, magazines, documents or similar; administrative services regime), as well as those direct hires referred to by • training, including transport, lodging and meals, duly supported and the General Regulations. approved by the public institution; • recognition or awards conferred in contests or events open to the 25 Public official participation in commercial activities public, as well as commemorative plaques, trophies or other articles Can a public official participate in commercial activities while of only commemorative value; • samples distributed for informational purposes and that have a nomi- serving as a public official? nal value; and Law No. 27588 outlines the prohibitions and incompatibilities of public • all others that the regulations to this law may determine. officials and servants, as well as state-services providers under any con- tractual agreement. 28 Private commercial bribery Directors, officers, high officials, members of advisory councils, Does your country also prohibit private commercial bribery? administrative tribunals, committees and other collegiate organs, direc- tors of state-owned companies and their representatives on board meet- Peruvian law penalises private commercial bribery with civil damages, ings, among others, have a number of restrictions or impediments with administrative sanctions and criminal liability. Private commercial bribery respect to exercising functions in private institutions or companies that can also involve third-party liability and certain administrative sanctions are connected with the specific area of their public duties, such as: when a crime is perpetrated carrying out the corporate mission of a com- • providing services to them in any form; pany or using the corporate entity to help or conceal criminal activity. See • accepting remunerated representative positions; question 9 for further detail. • holding board positions; • acquiring directly or indirectly shares or participations (includes 29 Penalties and enforcement subsidiaries and companies which may have economic ties with the What are the sanctions for individuals and companies violating same); the domestic bribery rules? • executing civil or commercial agreements; and • acting as attorneys, representatives, advisers, sponsors, experts or Peru’s Criminal Code sanctions the violation of domestic bribery rules arbitrators in ongoing processes with the same state organ to which with imprisonment from four to eight years, ‘penalty days’ (from 180 to they provide their services while holding their positions. 365), as well as prohibition from holding public office, suspension of politi- cal rights, prohibition from exercising a profession (attorneys and others), These impediments apply for one year after the termination or comple- and the removal of honorary titles and others. See questions 9 and 29 for tion of their services under any contractual arrangement, whether by sanctions applicable to companies. resignation, cessation, removal, dismissal, expiration or termination of the contract. 30 Facilitating payments Public officials such as congressmen, mayors and others are subject Have the domestic bribery laws been enforced with respect to to specific regulations in connection with participating in commercial facilitating or ‘grease’ payments? activities. Peru does not have specific regulations in connection with facilitating 26 Travel and entertainment payments. Describe any restrictions on providing domestic officials 31 Recent decisions and investigations with gifts, travel expenses, meals or entertainment. Do the restrictions apply to both the providing and receiving of such Identify and summarise recent landmark decisions and benefits? investigations involving domestic bribery laws, including any investigations or decisions involving foreign companies. There is no specific provision in Peru’s Criminal Code regarding gifts, travel expenses, meals or entertainment for domestic officials. However, Peru has a strong history of corruption within its governmental institutions articles 397 and 398 of the Criminal Code do not allow for the possibility and corruption remains a key concern of the population. of gifts, promises, or other advantages or benefits being offered or given Landmark decisions and investigations involve former presidents, to another person or entity in exchange for the performance or omission such as Alberto Fujimori, Alan Garcia and Alejandro Toledo, and four of of an act by a public official or civil servant in discharging his or her public the five main potential runners for the next presidential contest due in duties. The restrictions apply to both the soliciting of such benefits by a 2016. Each is subject to corruption allegations to different degrees, and public official as well as to the receiving of such benefits. while some are already imprisoned (Mr Fujimori), others await the results Similarly, Law No. 28024, which regulates domestic and foreign lobby- of ongoing investigations. In January 2015 a three-judge panel convicted ists, both companies and individuals, prohibits the direct or indirect receipt Mr Fujimori, who was president from 1990 to 2000, of funnelling more of any ‘generosity’ by a public official from a lobbyist or his representative. than US$40 million in public funds to tabloid newspapers that smeared his The prohibition includes gifts, donations, free services, employment and opponents during his 2000 re-election campaign. The judges sentenced
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Update and trends Some important anti-corruption legal advances took place during address significant anti-corruption matters, such as the imposition of 2014 in Peru. Law 30111 which introduces the imposition of fines for criminal corporate liability; the withdrawal of a statute of limitations corruption crimes, Law 30124 which amends the criminal definition for corruption crimes or duplication of the current prescriptive period; of public official, as well as Law 30161 and its regulations which the so-called ‘civil death’ for debtors of reparation payments for crimes require a sworn declaration of the income, goods and rent received by against the state; the requirement that lobbyists declare whose interests public officials and civil servants were enacted. In addition, various they represent; as well as regulations to protect whistle-blowers and government entities joined efforts to identify and provide information witnesses. of ongoing legal actions and investigations involving corruption, In addition, we must highlight that Peru encountered its first FCPA terrorism, drug trafficking and other alleged crimes of political enforcement action during 2014 with the Dallas Airmotive deferred candidates running for office. Similarly, an online visitors registration prosecution. As a result, Peru should not lose sight of recent FCPA system was introduced, requiring government entities to publish, in real developments which appear to broaden even more the reach of US time, the names of the visitors of their public employees, contributing jurisdiction. In the 2014 ground-breaking decision United States v Joel to increase transparency and generating mechanisms of social control Esquenazi and Carlos Rodriguez, the Eleventh Circuit Court of Appeals in the country. Perhaps the most significant anti-corruption advance was the first to review what is an ‘instrumentality’ under the FCPA, for the country has been the political effort led by the Anti-Corruption setting a precedent for the inclusion of non-traditional persons within Commission to gain Peru’s accession to the OECD Anti-Bribery the reach of the FCPA when these are deemed to perform a function Convention by means of two legislative projects aiming to regulate which the government of the foreign country may treat as its own and autonomous criminal liability for companies involved in bribery falls within the control of such government. This may bring a new crimes (for further details, see question 8 above). Although draft bills perspective when analysing FCPA compliance matters in Peru. Given Nos. 3851/2014-CR and 4054/2014-PE are still awaiting approval by the historical problems of cultural and social integration of its diverse congressional commissions at the Peruvian Congress, said political population, the Peruvian government has not only formally designated effort has allowed Peru to become a participant country in the OECD and recognised, but also transferred, traditional government functions Working Group on Bribery in International Business Transactions. to certain groups in its populatiorn, who also receive government However, in spite of these worthy developments, the country was subsidies and have varying degrees of government control. It is arguable not able to move forward with important pieces of anti-corruption that for Peru to maintain its outstanding performance as a leading legislation, already in draft form but delayed in some cases at the regional economy, the country must respond to and become integrated Council of Ministers and in others at congressional commissions, which with anti-corruption legislation at an international level.
him to eight years in prison and fined him US$1 million. This sentence will affidavits filed to run for office. Other well-known investigations include run concurrently with his 2009 sentence of 25 years in prison for human- the Facundo Chinguel case, where the former head of the Presidential rights violations. He has received additional sentences in several corruption Pardons Commission is accused of overseeing, while holding office, an cases. Transparency International has ranked him among the 10 most cor- illicit organisation to charge fees to those sentenced in drug-trafficking rupt leaders in recent history. Both Mr Garcia and Mr Toledo are caught up cases in exchange for a presidential pardon. Other cases involve an adviser in scandals involving the purchase of homes in two of Lima’s priciest neigh- to the national prosecutor, Jose Pelaez, for charging 10 per cent to private bourhoods. Mr Garcia is also facing allegations related to misappropriation service providers in exchange for being awarded construction contracts; and misuse of funds in infrastructure projects during his second term. He the former head of police of Callao province, whose personal bank account also faces questions about the more than 5,000 pardons he granted to drug was used to deposit income from traffic tickets issued to taxi drivers; and, traffickers during his first term. Mr Toledo, on the other hand, claims his among other cases, an illegal network within the administrative structure mother-in-law used her own funds to purchase a US$5 million house and of the national housing fund for the Peruvian police, which was charging to office in Lima. Luis Castaneda, who is expected to run for president in 2016, grant loans requested by police officers. Without a doubt the case of lawyer is facing questions over service contracts during his two terms as mayor Rodolfo Orellana Rengifo was the most scandalous corruption case in Peru of Lima from 2002 to 2010. Investigations involving the alleged kickbacks during 2014. Orellana operated with impunity a large criminal organisation to Mr Castaneda have been opened and closed by different judges several that fractured the country’s stability and corrupted its public institutions. times during the past three years. There are nearly 400 charges against him for the crimes of fraud, crimi- Recent corruption cases in Peru involving domestic bribery laws are nal conspiracy, money laundering, trafficking of land, among others. He is led by cases where bribery is sought by the public official or where there also accused of directing a corruption network that embraces institutions, is collusion among governmental institutions. For example, in Peru’s authorities and public officials. Notably, the 2014 end of year report by Congress, nearly a quarter of its members have faced ethical hearings on the Anticorruption Prosecutors Office reveals that corruption in Peru has corruption charges. Congressmen have been suspended for pirating and advanced considerably in all regions, as 92 per cent of mayors nationwide reselling cable-TV access, laundering illegally harvested wood and gold, are being investigated for alleged acts of corruption (crimes of embezzle- running a brothel and lying about educational achievements on sworn ment, peculation, misappropriation and collusion). The Anticorruption
Sandra Orihuela [email protected]
Avenida República de Panamá 3576 Tel: +51 1 221 6132 Suites 1102 and 1103 Fax: +51 1 421 5424 San Isidro, Lima 27 http://orihuelalegal.com Peru
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Prosecutors Office has 21,807 ongoing investigations involving public dense forest, including a wide stretch of the Amazon basin, which spreads prosecutors and mayors. across South America. Its preservation is considered central to combating With respect to corruption cases involving foreign companies, the global warming and protecting the many species of plants and animals Dallas Airmotive Inc matter described in section 16 above was the most sig- found only in the region. nificant of 2014. A landmark case remains the one involving energy rights In recent years, Peru has passed laws to crack down on illegal logging, in the Peruvian jungle. The corruption scandal followed the release in 2008 as required by the 2007 Free Trade Agreement with the United States. But of an audio tape into a television news show that included a conversation large quantities of timber, including increasingly rare types like mahogany, between Alberto Quimper, a board member of the state energy agency continue to flow out, much of it ultimately heading to the United States for Perupetro, and Romulo Leon, a prominent member of then President Alan products like hardwood flooring and decking sold by American retailers. Garcia’s political party, APRA, in which they apparently agreed to favour The World Bank estimates that as much as 80 per cent of Peru’s logging Discover Petroleum, a Norwegian company, in a round of energy auctions. exports are harvested illegally, and officials say the wood typically gets The company said it had made direct payments to Mr Leon and indirect shipped using doctored paperwork to make the trade appear legal. payments to Mr Quimper, who was subcontracted by Discover’s law firm Unfortunately, environmental-related enforcement has proven to provide tax advice. Discover, which partnered with government agency increasingly difficult due to the remoteness of the area, lack of funding for Petroperu to jointly explore the blocks, was awarded five blocks for energy this purpose and the deep pockets of international wood and lumber com- exploration, in spite of the fact that the three-year old company did not panies. Despite new legislation and the mandate under the trade agreement appear to have the financial backing to take on extensive offshore drilling. with the US, the Peruvian government has failed to tackle forestry-related A more recent corruption scandal involving foreign companies is also corruption. connected to the Peruvian jungle. More than half of Peru is covered by
156 Getting the Deal Through – Anti-Corruption Regulation 2015 Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW) PHILIPPINES
Philippines
Francisco Ed Lim and Chrysilla Carissa P Bautista Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW)
1 International anti-corruption conventions To eliminate domestic bribery, particularly in government procurement, To which international anti-corruption conventions is your Republic Act No. 9184, the Government Procurement Reform Act, was also enacted. country a signatory? On its own or upon the filing of any complaint, the Office of the In 2003, the Philippines became a signatory to the United Nations Ombudsman has the authority to investigate any unlawful act or omission Convention against Corruption (UNCAC). Pursuant to section 21, article committed by public officials and private individuals who conspired with VII of the Constitution, the convention was ratified after the agreement of them. Depending on the rank of the public official concerned, the criminal at least two-thirds of all the members of the Senate in 2006. cases are either filed with the anti-graft court, called the Sandiganbayan, or with the Regional Trial Court. For cases filed with the Sandiganbayan, 2 Foreign and domestic bribery laws the prosecution is assigned to the Office of the Special Prosecutor and for cases filed with the appropriate trial courts, the prosecution is assigned to Identify and describe your national laws and regulations prosecutors from the Office of the Ombudsman or any other deputised prohibiting bribery of foreign public officials (foreign bribery prosecutor in government service. laws) and domestic public officials (domestic bribery laws). To address the difficulty of prosecuting offenders of bribery and graft, There are no laws or regulations specifically penalising foreign brib- Presidential Decree No. 749 was promulgated affording immunity to wit- ery. While the Philippines is a signatory to UNCAC, no statute has been nesses who will testify against any public official or private individual. enacted to implement its provisions. For example, there is no law defining Immunity is afforded to witnesses even if they participated in the offence. foreign bribery as contemplated under article 16 of UNCAC. The granting of immunity to said witnesses is subject to the following Article XI of the Constitution contains provisions on the accountability conditions: of public officers. Section 2 thereof includes bribery among the grounds for • the information must refer to violations which have already been impeachment of the president, vice-president, members of the Supreme committed; Court, members of the Constitutional Commissions and the ombuds- • the information and testimony are necessary for the conviction of the man, while the other sections prescribe the functions of the Office of the accused public officer; Ombudsman, Office of the Special Prosecutor and the Sandiganbayan, • such information and testimony are not yet in the possession of the which all play a vital role in addressing the problem of bribery and corrup- state; tion in government from the filing of the complaint against erring public • such information and testimony may be corroborated on its material officers, prosecuting public officers and deciding these cases. points; and Also, the following are the applicable laws enacted penalising domes- • the informant or witness has not been previously convicted of a crime tic bribery: involving moral turpitude. • articles 210, 211, 211-A and 212 of the Revised Penal Code define and penalise direct, indirect, qualified bribery and corruption of public Foreign bribery officers; 3 Legal framework • Presidential Decree No. 46 expressly prohibits public officials and employees from receiving gifts and private individuals from giving Describe the elements of the law prohibiting bribery of a gifts; foreign public official. • Republic Act No. 3019, the Anti-Graft and Corrupt Practices Act, enu- There is no law defining foreign bribery as contemplated under article 16 merates specific corrupt practices committed by public officials and of UNCAC. extends the prohibition to private individuals who induce or cause public officials to commit the penalised acts; and 4 Definition of a foreign public official • Republic Act No. 6713, the Code of Conduct and Ethical Standards for Public Officials and Employees, prescribes a code of conduct for public How does your law define a foreign public official? officials and expressly prohibits the solicitation or acceptance of gifts Other than the definition of foreign public official in article 2(b) of UNCAC, of public officials and employees and extends the prohibition to private which provides that a foreign public official: ‘shall mean any person hold- individuals who participate in conspiracy with the public officials. ing a legislative, executive, administrative or judicial office of a foreign country, whether appointed or elected and any person exercising a pub- To strengthen the accountability of public officials, should it be determined lic function for a foreign country, including for a public agency or public that they illegally acquired or amassed wealth, the following laws were enterprise’, there is no other available definition in Philippine law. enacted: • Republic Act No. 1379 orders the forfeiture in favour of the state of any 5 Travel and entertainment restrictions property unlawfully acquired by the public official; and • Republic Act No. 7080 defines and penalises the crime of plunder, To what extent do your anti-bribery laws restrict providing which generally refers to a public official’s accumulation of ill-gotten foreign officials with gifts, travel expenses, meals or wealth in the aggregate or total amount of 50 million Philippine pesos entertainment? through a series of criminal acts, including the receipt of gifts or kick- There is no applicable law. backs in connection with a government contract or by reason of the office of the public official. www.gettingthedealthrough.com 157 PHILIPPINES Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW)
6 Facilitating payments Financial record keeping Do the laws and regulations permit facilitating or ‘grease’ 17 Laws and regulations payments? What legal rules require accurate corporate books and records, There is no applicable law. effective internal company controls, periodic financial statements or external auditing? 7 Payments through intermediaries or third parties Implicit in section 75 of the Corporation Code that affords stockholders the In what circumstances do the laws prohibit payments through right to be furnished with a corporation’s most recent financial statement intermediaries or third parties to foreign public officials? is the obligation of corporations to keep a record of its financial statements, There is no applicable law. including its balance sheet, a profit or loss statement which shows its assets and liabilities in reasonable detail and the result of its operations. Section 8 Individual and corporate liability 141 of the same code requires all corporations, whether domestic or for- eign, to submit to the Securities and Exchange Commission an annual Can both individuals and companies be held liable for bribery report of its operations, together with a financial statement of its assets of a foreign official? and liabilities, certified by an independent certified public accountant in appropriate cases, covering the preceding fiscal year. There is no applicable law. Section 17 of the Securities Regulation Code requires covered corpo- rations, including but not limited to issuers of securities listed for trad- 9 Civil and criminal enforcement ing on an exchange, to file an annual report which shall include, among Is there civil and criminal enforcement of your country’s other things, a balance sheet, profit and loss statement and a statement foreign bribery laws? of cashflows for the previous fiscal year, certified by an independent cer- tified public accountant, and a management discussion and analysis of There is no applicable law. results of operations within 135 days of the end of the corporation’s fiscal year. Such corporations are also subject to the Revised Code of Corporate 10 Agency enforcement Governance, which requires management to formulate rules and proce- What government agencies enforce the foreign bribery laws dures on financial reporting and internal control. and regulations? Section 232 of the National Internal Revenue Code requires corpora- tions or other persons required by law to pay internal revenue taxes to keep The Philippines has not enacted any law penalising foreign bribery. a journal and a ledger or their equivalents and for corporations whose gross However, with respect to the enforcement of its obligations under UNCAC, quarterly sales, earnings, or receipts exceed 150,000 Philippine pesos, to pursuant to article 6, paragraph 3 of UNCAC, the Office of the Ombudsman have their books of accounts audited and examined yearly by an independ- and the Commission on Audit were designated to assist other states in ent certified public accountant. developing and implementing specific measures for the prevention of Section 25 of the Government-Owned or Controlled Corporations corruption. (GOCC) Governance Act requires GOCCs to maintain a website and post thereon for unrestricted public access their latest annual audited financial 11 Leniency and performance report within 30 days from receipt, audited financial Is there a mechanism for companies to disclose violations in statements in the immediate past five years, quarterly, annual reports and exchange for lesser penalties? trial balance, current corporate operating budget, complete compensation package of all board members and officers, including travel, representa- There is no applicable law. tion, transport and any other form of expenses or allowances, local and foreign borrowings, performance scorecards and strategy maps, govern- 12 Dispute resolution ment subsidies and net lending, all borrowings guaranteed by the govern- Can enforcement matters be resolved through plea ment and such other information or report the Governance Commission agreements, settlement agreements, prosecutorial discretion for GOCCs may require. or similar means without a trial? 18 Disclosure of violations or irregularities There is no applicable law. To what extent must companies disclose violations of anti- 13 Patterns in enforcement bribery laws or associated accounting irregularities? Describe any recent shifts in the patterns of enforcement of the Under the Revised Code of Corporate Governance, management has foreign bribery rules. the duty to ‘ensure the corporation’s faithful compliance with all appli- cable laws, regulations and best practices’. The same code requires the There are none. compliance officer of the corporation to report any violation of laws and regulations to the board of directors and recommend the imposition of 14 Prosecution of foreign companies appropriate disciplinary action on the responsible parties and the adoption In what circumstances can foreign companies be prosecuted of measures to prevent a repetition of the violation. for foreign bribery? 19 Prosecution under financial record keeping legislation There is no applicable law. Are such laws used to prosecute domestic or foreign bribery? 15 Sanctions Both the National Internal Revenue Code and the Securities Regulation What are the sanctions for individuals and companies violating Code have penal provisions that generally apply to violations of said laws. the foreign bribery rules? In addition, section 257 of the National Internal Revenue Code penalises the making of false entries, records or reports and failing to keep books of There is no applicable law. accounts or keeping two or more sets of such books of accounts. The pros- ecution of these offences may proceed independently of the prosecution 16 Recent decisions and investigations for other criminal offences, such as bribery. Identify and summarise recent landmark decisions or investigations involving foreign bribery. 20 Sanctions for accounting violations What are the sanctions for violations of the accounting rules There are none. associated with the payment of bribes? There is no applicable law.
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21 Tax-deductibility of domestic or foreign bribes • directly or indirectly requesting or receiving any gift, present, share, Do your country’s tax laws prohibit the deductibility of percentage or benefit, for himself or for any other person, in connec- tion with any contract or transaction between the government and any domestic or foreign bribes? other party, wherein the public officer in his official capacity has to Section 34(A)(1)(c) of the National Internal Revenue Code expressly pro- intervene under the law; hibits or disallows the deduction of bribes, kickbacks and other similar • directly or indirectly requesting or receiving any gift, present or other payments. Notably, this provision contemplates both domestic and foreign pecuniary or material benefit, for himself or for another, from any bribes when it expressly prohibited the deduction from gross income of person for whom the public officer, in any manner or capacity, has ‘any payment made, directly or indirectly, to an official or employee of the secured or obtained, or will secure or obtain, any government permit national government, or to an official or employee of any local government or licence, in consideration for the help given or to be given; unit, or to an official or employee of a government-owned or controlled • accepting or having any member of his or her family accept employment corporation, or to an official or employee or representative of a foreign in a private enterprise which has pending official business with him dur- government, or to a private corporation, general professional partnership, ing that pending business or within one year after its termination; or a similar entity, if the payment constitutes a bribe or kickback’. • causing any undue injury to any party, including the government, or giving any private party any unwarranted benefits, advantage or Domestic bribery preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inex- 22 Legal framework cusable negligence. This provision shall apply to officers and employ- Describe the individual elements of the law prohibiting bribery ees of offices or government corporations charged with the grant of of a domestic public official. licences or permits or other concessions; • neglecting or refusing, after due demand or request, without sufficient Direct bribery under article 210 of the Revised Penal Code has the follow- justification, to act within a reasonable time on any matter pending ing elements: before him for the purpose of obtaining, directly or indirectly, from • the offender is a public officer; any person interested in the matter, some pecuniary or material bene- • the offender accepts an offer or promise or receives a gift or present by fit or advantage, or for the purpose of favouring his own interest or giv- himself or through another; ing undue advantage in favour of or discriminating against any other • such offer or promise is accepted or the gift or present is received by interested party; the public officer with a view to committing some crime, or in consid- • entering, on behalf of the government, into any contract or transaction eration of the execution of an act that does not constitute a crime but is manifestly and grossly disadvantageous to the same, whether or not unjust, or to refrain from doing something which it is his or her official the public officer profited or will thereby profit; duty to do; and • directly or indirectly having a pecuniary interest in any business, • the act which the offender agrees to perform or which he executes contract or transaction in connection with which he intervenes or is connected with the performance of his official duties (Magno v takes part in his official capacity, or in which he is prohibited by the Commission on Elections, GR No. 147904, 4 October 2002). Constitution or by any law from having any interest; • directly or indirectly becoming interested, for personal gain, or having Indirect bribery under article 211 of the Revised Penal Code has the fol- a material interest in any transaction or act requiring the approval of lowing elements: a board, panel or group of which he is a member, and which exercises • the offender is a public officer; and discretion in such approval, even if he votes against the same or does • the offender accepts the gifts offered to him by reason of his office. not participate in the action of the board, committee, panel or group; • knowingly approving or granting any licence, permit, privilege or ben- Qualified bribery under article 211-A of the Revised Penal Code may be efit in favour of any person not qualified for or not legally entitled to committed in one of two ways: such licence, permit, privilege or advantage, or of a mere representa- • by a public officer who is entrusted with law enforcement and refrains tive or dummy of one who is not so qualified or entitled; and from arresting or prosecuting an offender who has committed a crime • divulging valuable information of a confidential character, acquired by punishable by reclusión perpetua or death; or his office or by him on account of his official position to unauthorised • by a public officer who himself asks or demands for such gift or present. persons, or releasing such information in advance of its authorised release date. Corruption of public officials under article 212 of the Revised Penal Code has the following elements: Under section 7(d) of Republic Act No. 6713, otherwise known as the Code • the offender is any person who could either be a public officer or a of Conduct and Ethical Standards for Public Officials and Employees, pub- private person; and lic officials and employees are prohibited from soliciting or accepting any • the offender offers or promises or gives the gifts penalised under gift, gratuity, favour, entertainment, loan or anything of monetary value articles 210, 211 and 211-A of the Revised Penal Code. from any person in the course of their official duties or in connection with any operation being regulated by, or any transaction which may be affected Presidential Decree No. 46, which expressly penalises public officials and by, the functions of their office. employees from receiving gifts and private individuals from giving gifts, has the following elements: • the offender is either a public official or an employee who receives, or 23 Prohibitions • the private person who gives, the gift, present or other valuable thing; Does the law prohibit both the paying and receiving of a bribe? • the gift, present or other valuable thing is received or given on any Yes. Articles 210, 211 and 211-A of the Revised Penal Code on direct, indi- occasion, including Christmas; and rect and qualified bribery apply only to public officials, however, article 212 • such gift, present or valuable thing is given by reason of the public official or employee’s official position, regardless of whether or not the of the same code extends criminal liability for corruption of public officials same is for past favour or in the expectation of a future favour. to private individuals. Also, Presidential Decree No. 46, Republic Act No. 3019 and Republic Act No. 6713 extend to both public officials and private Another offence under Presidential Decree No. 46 is the hosting of parties persons. or entertainment in honour of the public official or employee or his imme- diate relatives. 24 Public officials Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt How does your law define a public official and does that Practices Act, penalises the following corrupt practices: definition include employees of state-owned or state- • persuading, inducing or influencing another public officer to perform controlled companies? an act constituting a violation of rules and regulations duly prom- ulgated by a competent authority or an offence in connection with The terms ‘public officials’ and ‘public officers’ are used in the different the official duties of the latter, or allowing himself to be persuaded, applicable laws penalising bribery and other corrupt practices. These terms induced, or influenced to commit such violation or offence; are defined as follows: www.gettingthedealthrough.com 159 PHILIPPINES Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW)
• article 203 of the Revised Penal Code defines ‘public officers’ as ‘any Republic Act No. 3019 expressly penalises public officers who request person who, by direct provision of the law, popular election or appoint- or receive any gift, present or other pecuniary or material benefit, for him ment by competent authority, shall take part in the performance of or herself or for another, from any person for whom the public officer, in public functions in the government of the Philippine Islands, or shall any manner or capacity, has secured or obtained, or will secure or obtain, perform in said government or in any of its branches public duties as any government permit or licence in consideration for the help given or to an employee, agent or subordinate official, of any rank or class’; be given. Section 4(b) of said law expressly extends the prohibition to any • section 2(b) in relation to section 2(a) of Republic Act No. 3019 defines person who knowingly induces or causes any public official to commit the ‘public officer’ to include ‘elective and appointed officials and employ- offences described therein. ees, permanent or temporary, whether in the classified or unclassified Under section 7(d) of Republic Act No. 6713, public officials and or exempt service receiving compensation, even nominal, from the employees are prohibited from soliciting or accepting any gift, gratuity, government’ and in turn, the term ‘government’ refers to the national favour, entertainment, loan or anything of monetary value from any per- government, local governments, government-owned and govern- son in the course of their official duties or in connection with any operation ment-controlled corporations, and all other entities or agencies of being regulated by, or any transaction which may be affected by the func- government and their branches; and tions of their office. Under this law, only public officials may be punished. • section 3(b) in relation to section 3(a) of Republic Act No. 6713 defines The Revised Penal Code penalises both the provider and recipient of ‘public officials’ to include ‘elective and appointed officials and gifts. The person who offers, promises or gives the gift is penalised for cor- employees, permanent or temporary, whether in the career or non- ruption of public officials under article 212. The public officer who accepts career service, including military and police personnel, whether or the gift offered him is punished either with direct bribery under article 210, not they receive compensation, regardless of amount’ and the term indirect bribery under article 211 or qualified bribery under article 211-A ‘government’ includes the national government, local governments, depending on the attendant circumstances. and all other entities, agencies or branches of the Republic of the Philippines, including government-owned or controlled corporations 27 Gifts and gratuities and their subsidiaries. Are certain types of gifts and gratuities permissible under your domestic bribery laws and, if so, what types? 25 Public official participation in commercial activities Can a public official participate in commercial activities while Section 14 of Republic Act No. 3019 expressly provides that ‘unsolicited gifts or presents of small or insignificant value offered or given as a mere serving as a public official? ordinary token of gratitude or friendship according to local customs or The absolute prohibition to participate in any business or to practise usage, shall be excepted from the provisions’ of said law. Similarly, section any other profession only applies to the president, vice-president, mem- 3(c) of Republic Act No. 6713 provides that unsolicited gifts of nominal or bers of the cabinet and their deputies and assistants (Constitution, arti- insignificant value not given in anticipation of, or in exchange for, a favour cle VII, section 13). However, members of the Senate and the House of from a public official or employee do fall under the term ‘gifts’ which are Representatives are required to make a full disclosure of their financial prohibited to be solicited or accepted by public officials or employees under and business interests upon assumption of office. They shall also notify the said law. Therefore, based on the foregoing provisions, unsolicited gifts of house concerned of any potential conflict of interest that may arise from nominal or insignificant value that were given as a mere ordinary token of the filing of a proposed legislation of which they are authors (Constitution, gratitude and friendship and not given in anticipation of, or in exchange article VII, section 12). Under section 6 of the Republic Act No. 3019 they for, a favour from a public official are permissible. Different factors are -con are also prohibited from acquiring or receiving any personal pecuniary sidered in determining whether a gift is of nominal value, such as the salary interest in any specific business enterprise that directly and particularly of the official or employee, the frequency or infrequency of the giving and benefits from any law or resolution written by them or previously approved the expectation of benefits (Rules Implementing the Code of Conduct and or adopted by Congress during the same term. Ethical Standards for Public Officials and Employees, rule X, section 1). Members of the Senate and the House of Representatives are prohib- With respect to gifts or grants from foreign governments, section 7(d) ited from personally appearing as counsel before any court of justice or of Republic Act No. 6713 allows the acceptance and retention by a public before the Electoral Tribunals, or quasi-judicial or administrative bodies, official or employee of a gift of nominal value rendered and received as and from having a direct or indirect financial interest in any contract with, a souvenir or mark of courtesy, gifts in the nature of a scholarship or fel- or in any franchise or special privilege granted by, the government, or any lowship grant or medical treatment as well as travel grants or expenses for subdivision, agency or instrumentality thereof, including any government- travel taking place entirely outside the Philippines (such as allowances, owned or controlled corporation, or its subsidiary, during their terms of transport, food and lodging) or more than nominal value if such accept- office (Constitution, article VII, section 14). ance is appropriate or consistent with the interests of the Philippines, and In the case of GOCC officials, ‘where a member of the board or an permitted by the head of office, branch or agency to which he belongs. officer, by virtue of the office, acquires or receives for oneself a benefit or However, there is no similar qualification in Presidential Decree No. profit, of whatever kind or nature including, but not limited to, the acqui- 46. Also, article 211 of the Revised Penal Code is general and quite broad sition of shares in corporations where the GOCC has an interest, using in its language as it penalises a public officer from accepting gifts offered to the properties of the GOCC for their own benefit, receiving commission him by reason of his office. on contracts from the GOCC’s assets, or taking advantage of corporate opportunities of the GOCC, all such profits or benefits shall be subject to 28 Private commercial bribery restitution’ and without prejudice to any administrative, civil or criminal Does your country also prohibit private commercial bribery? action against such erring member of the board or officer. This provision ‘shall be applicable notwithstanding the fact that such member of the There is no law prohibiting private commercial bribery. board or officer risked one’s own funds in the venture’ (Republic Act No. 10149, section 19). 29 Penalties and enforcement What are the sanctions for individuals and companies violating 26 Travel and entertainment the domestic bribery rules? Describe any restrictions on providing domestic officials For public officers under articles 210, 211, and 211-A of the Revised Penal with gifts, travel expenses, meals or entertainment. Do the Code on direct, indirect and qualified bribery, penalties range from impris- restrictions apply to both the providing and receiving of such onment, which in turn ranges from prision correccional in its medium period benefits? (two years, four months and one day to four years and two months) to Presidential Decree No. 46 expressly penalises the throwing of parties reclusión perpetua (20 years and one day to 40 years), to the death penalty. or entertainments in honour of a public official or employee or his or her The imposed fine is based on the value of the gift received, which should be immediate relatives. It also penalises both the public official and the pri- no less than twice or three times its value. The public officers shall also suf- vate person concerned. fer a temporary special disqualification or a disqualification from the office held and from holding similar offices during the terms of the sentence.
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For offenders punished under article 212 of the Revised Penal Code on corruption of public officials, the imposed penalty is the same as those Update and trends imposed under articles 210, 211, and 211-A of the same code. But for private persons, the penalties of disqualification and suspension are inapplicable. It has been reported that the Sandiganbayan, also known as the Anti-Graft Court, has convicted a number of government officials. For violation of Presidential Decree No. 46, the imposed penalty on One case involved a city mayor who was convicted for violation of public officials and private persons is imprisonment for not less than one Republic Act No. 3019 because of his refusal to to comply with a year nor more than five years. For convicted public officials, they shall also Civil Service Commission order to reinstate a budget officer whom suffer perpetual disqualification from public office. The public official or he repeatedly relieved and transferred to other positions in City Hall. employee concerned shall likewise be subjected to administrative discipli- Another case involved a town mayor and other officials who were nary action for which he may either be suspended or removed from office. convicted for violation of Republic Act No. 3019 because they failed For commission of the corrupt practices defined by Republic Act to conduct a bidding for the purchase of construction materials. In No. 3019, the penalty for public officials and private persons is imprison- another case, former city engineering officials were also convicted ment ranging from six years and one month to 15 years plus confiscation for violation of Republic Act No. 3019 for giving preferential treatment to a certain disco operator. A building permit was issued or forfeiture in favour of the government of any prohibited interest and for the disco despite its non-compliance with the building code. As unexplained wealth. For public officials, they shall also suffer perpetual a result, when the establishment was gutted by a fire, its patrons disqualification from office. were left dead or injured. While many have been displeased with the For violation of Republic Act No. 6713, the penalty ranges from impris- delay in the resolution of cases, the reports on the Sandiganbayan’s onment not exceeding five years and a fine not exceeding 5,000 Philippine decisions have been welcomed. pesos, or both. However, section 11 of Republic Act No. 6713 provides that, if the violation of said law is punishable by a heavier penalty under another law, the public official or private individual should be prosecuted under Bong Revilla Jr, as well as businesswoman Janet Lim-Napoles (Napoles), the other law. The public official or employee concerned shall likewise be with plunder in connection with the alleged 10 billion Philippine peso subjected to administrative disciplinary action for which he may either be pork barrel scam. In its Resolution, the Ombudsman found that the three suspended or removed from office. senators took undue advantage of their official position to illegally divert Based on the applicable laws, only natural persons, either public offi- their respective Priority Development Assistance Fund (PDAF) allocations cials or private individuals, may be prosecuted for violations thereof. Also, to non-government organisations linked with Napoles in exchange for public officials or employees may be found both criminally and adminis- kickbacks. tratively liable. Vice President Jejomar Binay and his son Makati City Mayor Jejomar Under Philippine law, a corporation may not be held criminally liable Erwin Binay also face plunder charges involving the allegedly overpriced when the statute does not expressly specify corporations are among those Makati City Hall parking building. According to the complaint, the parking who could violate the statute (West Coast Life Insurance Co v Hurd, 27 Phil building construction was overpriced by 300 per cent. Based on the report 401 [1914]). of the Commission on Audit, the cost of said building has reached 2.367 billion Philippine pesos and overpriced by 1.601 billion Philippine pesos. 30 Facilitating payments Other Makati City infrastructure projects are alleged to be overpriced. The Have the domestic bribery laws been enforced with respect to said controversy was investigated by the Senate Blue Ribbon Committee. facilitating or ‘grease’ payments? More recently, the Ombudsman ordered the preventive suspension for six months of Philippine National Police (PNP) Chief Director General Yes. For example, in Cadiao-Palacios v People of the Philippines (GR No. Alan Purisima, along with other PNP officials. The order of suspension 168544, 31 March 2009), the Supreme Court affirmed the Sandiganbayan’s stems from the graft complaint filed last October against the PNP chief decision convicting the municipal mayor and municipal security officer of and at least 11 other police officials over the alleged misuse of gun owners’ demanding and receiving ‘grease money’ to facilitate the release of the final courier fees. It was found that PNP Chief Purisima approved the contract payment to a government contractor for the construction of municipal roads. services of a private company, WERFAST Documentary Agency, without the required accreditation from the PNP Firearms Explosive Office and 31 Recent decisions and investigations the Department of Science and Technology-Postal Regulation Committee. Identify and summarise recent landmark decisions and PNP Chief Purisima also faces separate graft, plunder and indirect bribery investigations involving domestic bribery laws, including any complaints over his alleged undervalued mansion in San Leonardo, Nueva investigations or decisions involving foreign companies. Ecija, the 12 million Philippine peso construction of the PNP Chief’s offi- cial residence called the White House at Camp Crame in Quezon City, In 2014, the Office of the Ombudsman (Ombudsman) filed an informa- and his purchase of a Toyota Land Cruiser at a huge discount. tion charging Senators Juan Ponce Enrile, Jinggoy Estrada and Ramon
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1 International anti-corruption conventions with the performance of a public function in a foreign country or in an To which international anti-corruption conventions is your international organisation; (ii) requesting financial or personal gain in connection with the perfor- country a signatory? mance of a public function in a foreign country or in an international Poland is a party to the following international anti-corruption conventions: organisation; • the United Nations Convention against Corruption (UNCAC) (entered (iii) making the performance of an official action in connection with the into force on 15 October 2006); performance of a public function in a foreign country or in an inter- • the OECD Convention (entered into force on 7 November 2000); national organisation contingent on being given financial or personal • the Council of Europe Convention on Laundering, Search, Seizure gain; and Confiscation of the Proceeds from Crime and on the Financing of (iv) making or submitting a promise to provide financial or personal gain Terrorism (entered into force on 1 May 2008); with respect to a person performing a public function in a foreign • the Civil Law Convention on Corruption of the Council of Europe country or in a international organisation; (entered into force on 1 November 2003); and (v) intermediating in dealing with a matter in exchange for financial of • the Criminal Law Convention on Corruption of the Council of Europe personal gain or a promise thereof invoking the influences in an inter- (entered into force on 1 April 2003). national organisation or a foreign organisational unit administering public funds, or convincing or making another person believe in the 2 Foreign and domestic bribery laws existence of such influences; and (vi) making or submitting a promise to provide financial or personal gain Identify and describe your national laws and regulations in exchange for intermediating in dealing with a matter in an interna- prohibiting bribery of foreign public officials (foreign bribery tional organisation or in an organisational unit administering public laws) and domestic public officials (domestic bribery laws). consisting in unlawfully exerting the influence on the decision, act or Polish law does not have specific legislation regulating corruption. omission of a person holding a public function in connection with the Provisions penalising acts of corruption in terms of both its active aspect performed function. (corrupting) and the passive (being corrupted), both in relation to acts com- mitted in Polish territory and abroad, with respect to Polish nationals and The person who commits the acts set out in items (iv) and (vi) will not foreigners, are provided for in the Polish Criminal Code (CC). As regards be subject to punishment if the financial or personal gain, or the promise corruption offences committed abroad, the CC provides for additional thereof, is accepted and the offender informs a law enforcement agency application of Polish jurisdiction. The condition of criminal liability for of this fact and discloses all material circumstances of the offence before it acts of corruption committed abroad is that such acts must also be rec- has come to the authority’s attention. ognised as criminal offences under the local law of the places where the events occurred. This, however, does not apply to acts committed in a place 4 Definition of a foreign public official not under the jurisdiction of any state authority or committed abroad by How does your law define a foreign public official? Polish public officials exercising their functions. A foreigner will be liable for the criminal offence of corruption committed abroad if: The CC does not provide a definition of ‘foreign public official’. Corruption (i) the act was directed against the interests of the Republic of Poland, a offences relating to foreign public officials have been formulated by -ref Polish citizen, a Polish legal person or a Polish organisational entity erence to ‘the performance of a public function in a foreign country or in without a legal personality; or an international organisation’ and a foreign entity administering public (ii) in case of acts other than in (i) above, if the offender stays in Poland funds. Neither does the CC contain any definition of ‘performing a public and no decision on his or her extradition has been taken, and the function’, only a definition of ‘a person performing a public office’. offence in question is not classified as a case of ‘lesser importance’. In judicial decisions (which in Poland are not a source of law, but do have an impact on the understanding of legal concepts), it is acknowledged Provisions specifying corruption offences are stipulated in articles 228, that the: 229, 230, 230a, 250a, 296a of the CC. In addition, the Law on Liability of Collective Entities for Acts Prohibited under Penalty (Collective Liability ‘public function’ is performed by people who carry out the tasks Law) provides for sanctions applicable to companies whose representa- entrusted to them by the state or local government institutions, and tives have committed the aforementioned corrupt criminal offences (both thus they have a significant impact on content of general social deci- domestic and foreign). sions. The distinguishing feature of a public office is a specific scope of authorisation that allows to shape the content of tasks performed in Foreign bribery the public sphere.
3 Legal framework A ‘person performing a public function’ is defined by the CC as a public Describe the elements of the law prohibiting bribery of a official, a member of a self-governing authority, an employee of an organi- foreign public official. sational unit administering public funds (unless he or she performs exclu- sively services-type work) and any other person whose rights and duties in Under the CC the following acts are punishable: terms of public activities are defined or recognised by law or by an interna- (i) accepting material or personal gain or a promise thereof in connection tional agreement to which the Poland is bound.
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5 Travel and entertainment restrictions (iv) who is an entrepreneur directly cooperating with the company in To what extent do your anti-bribery laws restrict providing achieving a legally permissible objective. foreign officials with gifts, travel expenses, meals or The condition for the liability of companies is that a prohibited act commit- entertainment? ted by the persons described above must be confirmed by a final judgment The CC does not make any distinction between criminal offences based of conviction with respect to this person, a judgment on conditional dis- on the item or value provided, or accepted financial or personal gains. It is continuance of criminal proceedings with respect to this person, the ruling understood, however, that in current practice, providing or accepting cer- granting this person a permission to voluntarily yield to punishment or a tain benefits will not be an offence. court ruling discontinuing the proceedings against this person because of Some general rules apply, but exceptions may exist depending on the the circumstances that exclude submission of the offender to punishment. situation and the function performed by the recipient; it should be thus The company will be subject to liability if a criminal offence has been acknowledged that in each case, handing over or receiving such a benefit committed by the aforementioned person as a result of: will be subject to assessment due to the social impact of such an act. This • lack of due diligence in the appointment of the person referred to in applies to situations where the gain given is of an insignificant value or falls items (ii) or (iii) above, or at least the lack of proper supervision over within the limits of customary behaviour such as ‘acknowledgement’ for this person – on the part of the body or representative of the company; performing statutory tasks by a public official in accordance with the law. and In addition, the performance of an official task by a public official is not • the organisation of the company’s operations, which failed to ensure contingent on receiving any gain, nor was any gain awarded to the official the avoidance of a prohibited act by a person referred to in items (i) or at his or her request. (iv), while this may have been ensured by the exercise of due diligence, as required under given circumstances, by the authority or company 6 Facilitating payments representative. Do the laws and regulations permit facilitating or ‘grease’ 9 Civil and criminal enforcement payments? Is there civil and criminal enforcement of your country’s Polish law does not regulate such issues. foreign bribery laws?
7 Payments through intermediaries or third parties There is both criminal and civil liability for the breach of corruption law in Poland. See question 15. In what circumstances do the laws prohibit payments through intermediaries or third parties to foreign public officials? 10 Agency enforcement Acting as an intermediary or ordering such action to take place in deal- What government agencies enforce the foreign bribery laws ing with a matter in exchange for financial or personal gain is a criminal and regulations? offence (see also question 3, items (v) and (vi)). Additionally, with respect to any offences of corruption, a person who In Poland there is no specialist agency dealing exclusively with the prose- induces another person to commit a criminal offence will be held liable as cution of corruption of foreign officials. The main service that acts in cases the ‘instigator’. of combating corruption of foreign officials is the Central Anti-Corruption Bureau. 8 Individual and corporate liability The remit of the Central Anti-Corruption Bureau includes prosecution of foreign officials demanding bribes and persons offering them bribes, if Can both individuals and companies be held liable for bribery this is within Polish jurisdiction (see question 2). of a foreign official? Generally, the Central Anti-Corruption Bureau mainly operate out- Only natural persons may be held criminally liable for the commission of side Polish borders in connection with activities in Polish territory, where the offence of corrupting foreign officials. As regards liability of natural potential perpetrators are criminally liable in Poland. persons for the acts committed abroad, see question 2. The second special service, the Internal Security Agency, has powers Entities other than natural persons may be subject to economic to combat corruption by foreign officials if it is connected with basic Polish and administrative sanctions as a result of corruption-related offences. economic interests. The police also have powers to prosecute any criminal The fundamental legislative act governing this liability is the Collective offences. Liability Law. The act defines a ‘collective entity’ vaguely as ‘a legal person or organisational entity without personality at law for which specific legal 11 Leniency provisions grant legal capacity, except for the State Treasury, local self- Is there a mechanism for companies to disclose violations in government units and their associations’, as well as ‘a commercial company exchange for lesser penalties? with equity participation of the State Treasury, a local self-government unit or an association thereof, a commercial company in organisation, an entity Polish law does not provide for the possibility of reducing a company’s lia- in liquidation, and an entrepreneur other than a natural person, as well as a bility in exchange for cooperation at the disclosure of violations of the law. foreign organisational entity’. Collective entities (‘companies’, with the reservation, however, of the 12 Dispute resolution definitional scope indicated above) may be subject to additional property- Can enforcement matters be resolved through plea related and administrative sanctions in connection with offences of corrup- agreements, settlement agreements, prosecutorial discretion tion. Proceedings must be initiated upon the motion of the state prosecutor or similar means without a trial? or the injured party. A company is liable for a prohibited act of corrupting a foreign official The Polish Code of Criminal Procedure (CCP) provides the possibility if the conduct brought or could bring an advantage – even non-pecuniary – of the summary proceedings known as ‘voluntary submission to punish- to the company and was committed by a natural person: ment’, which allows a judgment of conviction to be rendered and a penalty (i) who acts on its behalf or in its interest within the limits of the authori- or a penal measure imposed upon the accused without any evidentiary sation or duty to represent it, making decisions on its behalf, or exer- proceedings. cising external control or by exceeding this authority or breach of this The request of the accused for such may be accepted once a number of obligation; conditions are satisfied: (ii) allowed to act as a result of exceeding the rights or breach of duties of • the act imputed in the indictment is a misdemeanour; the person referred to in item (i); • the defendant’s request is submitted no later than the end of the first (iii) acting on its behalf or in its interest, with the consent or knowledge of interrogation of all the accused persons in the main court hearing; the person referred to in item (i); or • according to the court, the circumstances of the offence do not raise any doubts;
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• in the court’s opinion, the objectives of the proceedings will be A person who suffered damage as a result of corruption may seek com- achieved despite a failure to conduct the entire proceedings; and pensation during a criminal trial if he or she decides to submit civil claim • neither the state prosecutor nor the injured party oppose acceptance of herewith, or independently in a regular civil proceeding. the request. Liability of companies In addition, in a voluntary submission to punishment, the Polish legisla- Corporate liability for acts of corrupting foreign officials (see question 8) tor has reserved the right to conduct evidentiary proceedings only in part may involve the obligation to reimburse benefits received in connection (article 388 of the CCP), if: with a prohibited act committed by a natural person (as described above); • the explanations provided by the accused raise no doubt; and sanctions may be imposed in a judgment rendered with respect to the • the parties present at the hearing give their consent to such a foregoing natural person (under the provisions of the CC). procedure. Under the Collective Liability Law, the court may impose the follow- ing sanctions: 13 Patterns in enforcement • a fine ranging from 1,000 to 5 million zlotys but not exceeding 3 per Describe any recent shifts in the patterns of enforcement of the cent of the revenue earned in the financial year in which the prohibited foreign bribery rules. act was committed; • forfeiture of items even indirectly derived from an offence or that have There have been no substantial amendments introduced to the Polish law served, or were intended to commit a criminal act; on the matter since July 2003, nor have there been any significant changes • forfeiture of material benefits derived even indirectly from a prohib- in enforcement patterns. ited act; and • forfeiture of the equivalent of objects or a material benefit derived – 14 Prosecution of foreign companies even indirectly – from a prohibited act. In what circumstances can foreign companies be prosecuted The court may also order, in relation to companies: for foreign bribery? • prohibition of promotion or advertising of the business, manufactured As indicated in question 8, the definitional scope concerning entities that or sold products, services rendered or benefits provided; may be held liable for corruption-related acts and are not natural persons • prohibition of use of grants, subsidies or other forms of financial sup- causes problems in practice. Attention should be paid to the vague defini- port from public funds; tion of ‘foreign organisational units’, as the act does not specify whether it • prohibition of use of the assistance rendered by international organi- concerns only those units that conduct business activity in Polish territory. sations of which Poland is a member; The legislation certainly applies foreign ‘companies’ whose branches or • prohibition of applying for public procurement contracts; and representation offices are registered in Poland, but it is not certain whether • the judgment being made publicly known. it also concerns foreign companies that do not carry out organised activi- ties in Poland. Liability or lack of liability of the company based on the principles laid Bearing in mind these definitional problems, a foreign ‘company’ down in the Collective Liability Law does not preclude civil liability for may be held liable in Poland for corruption-related acts, including those damages caused, administrative liability or individual liability of the per- committed abroad only in the case of assertion of the commission of the petrators of a prohibited act. corruption-related act by a representing natural person (see question 8 in the scope of conditions for liability of ‘company’). 16 Recent decisions and investigations Identify and summarise recent landmark decisions or 15 Sanctions investigations involving foreign bribery. What are the sanctions for individuals and companies violating We have no data concerning corruption of foreign officials. the foreign bribery rules?
Liability of natural persons Financial record keeping For the offences referred to in items (i) to (iv) of question 3, the CC provides 17 Laws and regulations for the following penalties: • the basic type: from six months’ to eight years’ imprisonment; What legal rules require accurate corporate books and records, • in the qualified type (in exchange for conduct in violation of the law, effective internal company controls, periodic financial and where the benefit or the promise is of a significant value): from one statements or external auditing? year to 12 years’ imprisonment; and • in the case of lesser importance: a fine, restriction or deprivation of The basic legislative act governing accounting issues in the Polish legal liberty for up to two years. system is the Act on Accounting dated 29 September 1994 (DzU [Journal of Laws] 1994 No. 121, item 591 as amended). The act sets out the prin- For the offences referred to in items (v) and (vi) of question 3, the CC ciples of accounting, financial statement auditing procedures by certified provides for the following penalties: the basic type: from six months public auditors, and the principles of conducting activity within the scope to eight years’ imprisonment; and cases of lesser importance: a fine, of book-keeping services. In addition, there is a wide range of legislative restriction or deprivation of liberty for up to two years. acts of the generally applicable laws – statutes and implementing regula- Additionally, under the provisions of the CC it is also possible to tions – that provide specific procedures for accounting, financial reporting impose punitive measures in the form of: and internal controls for certain types of activity. These include invest- • a ban on holding a particular position; ment companies (the Act on Trading in Financial Instruments) and public • prohibition of practising professional activity; companies (the Act on Public Offerings). • prohibition of conducting economic activities; • forfeiture of items; 18 Disclosure of violations or irregularities • forfeiture of gains; To what extent must companies disclose violations of anti- • making a judgment publically known; and bribery laws or associated accounting irregularities? • a pecuniary consideration for a specific social purpose. Everyone has a social duty to report a criminal offence, and state and local When sentencing cases of corruption, the courts usually decide on depri- authorities have a duty to report offences about which they learn under vation of liberty, potentially suspended, and a fine. A fine is imposed apart article 304 of the CCP. There are no specific regulations regarding disclo- from deprivation of liberty as an additional pecuniary punishment when sure of information on bribery because article 240 stipulates a criminal the perpetrator has obtained a financial benefit from an offence. sanction for the failure to report the criminal offence of murder or terror- ism. Bribery falls outside this article.
164 Getting the Deal Through – Anti-Corruption Regulation 2015 Kruk and Partners Law Firm POLAND
19 Prosecution under financial record keeping legislation as well as indirectly (conclusion of a contract to render services with a Are such laws used to prosecute domestic or foreign bribery? given person under favourable conditions). The problem of distinguish- ing generally accepted tips or other forms of gratuity for rendered assis- Polish law – in particular accounting law and tax law – provides that tance from punishable bribes has long been the subject of discussion in the fiscal documents must be kept for five years from the end of a tax year. The doctrine and jurisprudence. Anti-corruption provisions do not provide for Tax Acts explicitly prohibits bribes from being classified as tax-deductible any restrictions de minimis and, therefore, it is not the value of the ben- expenses. Each accounting or bank document may qualify as evidence efits that distinguishes these cases. The line between these two situations in criminal proceedings. The Accounting Law Act itself provides for such should be drawn by examining whether the benefit is socially harmful penalties, eg, for a failure to file accounts for the previous financial year to an extent higher than is negligible. It is emphasised that in assessing with the registry court. Criminal sanctions for fiscal offences are stipulated whether the benefit received is ‘socially dangerous’ all the circumstances in Penal Fiscal Code. should be taken into account. A test has been proposed for this purpose, taking into account the rank and importance of official actions performed 20 Sanctions for accounting violations by a person holding a public office on the occasion of which the benefit was What are the sanctions for violations of the accounting rules obtained, the value of the benefit, and generally accepted practices in the community. In each case, therefore, in the context of all the circumstances associated with the payment of bribes? it should be assessed whether the granting of a benefit violates the purpose In the Polish legal system bribes are in no way viewed as legally exist- of the anti-corruption provisions (ie, ensuring fairness and transparency of ing sources of income or expenses incurred by business entities. For this persons who hold public office). reason, there are no principles dealing with accounting for bribes. 23 Prohibitions 21 Tax-deductibility of domestic or foreign bribes Does the law prohibit both the paying and receiving of a bribe? Do your country’s tax laws prohibit the deductibility of Yes, for more information see question 22. domestic or foreign bribes? At a meeting of the Working Group of the OECD, Poland bound itself to 24 Public officials specify in legal provisions that a bribe is not a tax-deductible expense. How does your law define a public official and does that An amendment to the Law on Corporate Income Tax within this definition include employees of state-owned or state- scope, which entered into force on 1 January 2009, proscribes that the controlled companies? expenditure incurred or the value of items, rights or services that result from actions that may not be the subject of a legally effective contract (eg, The CC provides a definition of ‘public official’ under which the public bribes), be classified as tax-deductible expenses (article 16, section 1, item official will be: 66 of the Corporate Income Tax Act). The same provision (article 23, sec- • the President of the Republic of Poland; tion 1, item 61) is included in the Law on Personal Income Tax. • a deputy, senator, councillor; • a judge, state prosecutor, notary, trustee in bankruptcy; Domestic bribery • an employee of the state administration, audit authority unless he or she performs only services-type work; 22 Legal framework • a person who occupies a managerial position in another state institu- Describe the individual elements of the law prohibiting bribery tion; and of a domestic public official. • a person performing active military service. The following are forbidden by law (venality, passive bribery): Moreover, the CC introduces a definition of ‘a person holding a public (i) acceptance of material or personal gain or a promise thereof by the office’ referred to in question 4. person holding a public office and in connection with the function In criminal law, there is a dispute as to whether employees of state- performed; owned companies or companies supervised by the state treasury hold a (ii) acceptance of material or personal gain or a promise thereof in public office, and as a result, entities capable of incurring criminal liability exchange for conduct constituting violation of the provisions of law for corruption offences. The prevailing view in the doctrine is that direc- by a person holding a public office in connection with the function tors of state-owned companies and persons employed in state-owned com- performed; panies, as a rule, should be considered employees of organisational units (iii) making the performance of an official action contingent on the receipt administering public funds, and therefore they fall within the definition of of material or personal gain or a promise thereof by a person exercis- a person holding a public office. In particular, this applies to persons man- ing public office and in connection with the function performed; and aging business entities in which the share of the state treasury exceeds 50 (iv) demand of material or personal gain in exchange for the performance per cent. of an official action by a person holding a public office and in connec- However, with respect to entities other than state-owned compa- tion with the function performed. nies (mainly companies formed under the Commercial Companies and Partnerships Code (formerly the Commercial Code), even with a state- Moreover, the following shall be prohibited by law (corruption, active owned majority share), it is presumed that members of their management bribery): and supervisory bodies are not persons performing public functions. (i) granting material or personal gain or promise thereof to a person hold- ing a public office in connection with the performance of this function; 25 Public official participation in commercial activities (ii) granting material or personal gain or a promise thereof to a person holding public office in connection with the performance of this func- Can a public official participate in commercial activities while tion in order to induce a person performing a public function to violate serving as a public official? the provisions of law; and The Act on Restrictions on Conduct of Business Activities by Persons (iii) granting material or personal gain or a promise thereof to a person Performing Public Functions imposes a restriction on the conduct of busi- holding public office, in connection with the performance of this func- ness activities by officials of a certain status. These restrictions apply, for tion, in exchange for the violation of the provisions of law. the most part, to people holding top positions in government agencies and senior positions in both the state and the local government administra- Handling and accepting gains before, during and after completion of the tions, and people in managerial positions in companies in which the state official actions are all subject to criminal liability. treasury is the majority shareholder or the stakeholder, as well as judges of When analysing the nature of the material gain it should be noted that the constitutional tribunal. the law does not impose any restrictions in this respect. This can be a mate- It is important that the law provides a general prohibition (during the rial, personal or mixed gain. period of holding a position or function) with regard to conducting one’s The form of granting a benefit is also irrelevant. The benefit can be own business or jointly with others, or to managing such an activity or act given either directly (for example, passing on a certain amount of money) www.gettingthedealthrough.com 165 POLAND Kruk and Partners Law Firm as a proxy or representative in the conduct of such business. Persons bound • item (i) imprisonment for six months to eight years, while in cases of by the legislative act must also provide information about any business lesser importance, the sanction is less severe and facilitates adjudicat- activities conducted by their spouse. ing a fine, limitation of liberty or imprisonment for up to two years; During the period when they hold the position and perform the func- • item (ii): imprisonment for one to 10 years; but if the accepted finan- tion, persons bound by this legislative act cannot be members of corporate cial benefit is of significant value, the penalty is imprisonment for two bodies of commercial companies or housing cooperatives, members of the to 12 years; and management board of foundations; neither can they be employed or per- • items (iii) and (iv): imprisonment for one to 10 years. form other activities in commercial companies that may lead to suspicions as to their partiality or self-interest, or hold more than 10 per cent of the As to adjudicating penalty as an additional punishment or punitive meas- share capital in commercial companies. ures, see question 15.
26 Travel and entertainment Sanctions for ‘collective entities’ (including shareholding Describe any restrictions on providing domestic officials companies) with gifts, travel expenses, meals or entertainment. Do the See question 15 concerning the liability of companies. restrictions apply to both the providing and receiving of such 30 Facilitating payments benefits? Have the domestic bribery laws been enforced with respect to See questions 22, 23 and 5 respectively. facilitating or ‘grease’ payments? 27 Gifts and gratuities Polish law does not have regulations permitting the provision of such kinds Are certain types of gifts and gratuities permissible under your of benefits. In consequence, they shall be subject to legal and penal assess- ment on general terms. domestic bribery laws and, if so, what types? See questions 22, 23 and 26. 31 Recent decisions and investigations Identify and summarise recent landmark decisions and 28 Private commercial bribery investigations involving domestic bribery laws, including any Does your country also prohibit private commercial bribery? investigations or decisions involving foreign companies. Any person that exercises a managerial function in an organisational unit In recent years, a case concerning the bribe receiving by Polish politician conducting a business activity, or remains in an employment relationship, has been pending before Polish courts and under scrutiny of the Polish a relationship concerning a contract of mandate, or a contract to perform a media. It all started in 2007, when the Anti-Corruption Bureau (CBA) specific task will be subject to criminal liability if he or she: detained Beata Sawicka, a Member of the Polish parliament, while accept- • demands or accepts financial benefit or the promise of such in exchange ing a bribe of 50,000 zlotys from the CBA agent, who pretended to be a for the abuse of the powers granted to him or her or fails to fulfil incum- businessman. In this respect, in May 2012 the Regional Court in Warsaw bent duties that may inflict financial damage on that entity; or sentenced her to three years’ imprisonment. However, in April 2013 the • may constitute an act of unfair competition or an inadmissible act of Court of Appeals in Warsaw allowed the appeal of the defendant and Beata favouritism to the benefit of the acquirer or recipient of the goods, Sawicka was cleared of the charge. A few months ago the Supreme Court in service or performance. Poland upheld a judgment acquitting the politician. The judges pointed out that, Sawicka had indeed taken a bribe, but operations techniques applied The perpetrator is not subject to a penalty if the financial or personal benefit by the Anti-Corruption Bureau were unlawful and in consequence the or their promise was accepted and the perpetrator informed the authority evidence gained during these operations became illegal. It was found that appointed to prosecute offences about that fact and disclosed all material mentioned operations were carried out without the legal statutory prereq- circumstances of the offence before the authority learned about it. uisites. The assumption was that CBA has no right to invigilate a freely chosen person without raising suspicion that this person might commit a 29 Penalties and enforcement crime in the future. In addition, the Supreme Court served a reminder that What are the sanctions for individuals and companies violating the constitutional rule of the democratic state of law prohibits keeping citi- the domestic bribery rules? zens under surveillance to gain evidence against them. This is a reference to the ‘fruit of the poisonous tree’ doctrine used to describe evidence that Sanctions for natural persons is obtained illegally. The penalties for the prohibited acts indicated in question 22 are as follows:
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166 Getting the Deal Through – Anti-Corruption Regulation 2015 PLMJ – Sociedade de Advogados, RL PORTUGAL
Portugal
Alexandra Mota Gomes and Dirce Rente PLMJ – Sociedade de Advogados, RL
1 International anti-corruption conventions Article 374(1 and 2) of the Criminal Code creates the offence of ‘active To which international anti-corruption conventions is your corruption’, where a person gives or promises (by himself or through a third party with his consent or approval) to a public official or to a third party country a signatory? with the public official’s knowledge, a financial or other advantage, in order Portugal is a signatory to: to lead the public official to act or omit to act (or to ‘reward’ a previous act • The United Nations Convention against Corruption (Corruption or omission), regardless of whether the act or omission is in breach of the Convention), signed on 7 December 2003 and ratified by Portugal on public official’s duties. 12 September 2007. Moreover, on 28 November 2001, criminal offences of corruption were • The United Nations Convention against Transnational Organized created in respect of political office holders and high-ranking public offi- Crime, signed on 12 December 2000 and ratified by Portugal on 10 cials. These offences were then incorporated into Law No. 34/87 of 16 July May 2004. 1987 (most recent amendment: Law No. 4/2013 of 14 January 2013). • The Council of Europe Criminal Law Convention on Corruption (Civil Under article 18(1 and 2) of this law, it is a criminal offence for a person Law Convention on Corruption), signed on 30 April 1999 and ratified to give or promise (even if through a third party, with that person’s consent by Portugal on 20 September 2001. or approval) to a political office holder, a high-ranking public official or to a • The Convention on the Fight against Corruption involving Officials third party (upon the political office holder or high-ranking public official’s of the European Communities or Officials of Member States of the orders or with any of those persons’ knowledge) a financial or other advan- European Union, adopted by the member states on 26 May 1997 and tage, in order to lead the public official to act or omit to act (or to ‘reward’ a ratified by Portugal on 3 December 2001. previous act or omission), regardless of whether that conduct or omission • The OECD Convention on Combating Bribery of Foreign Public breaches the political office holder’s or public official’s duties. Officials in International Business Transactions, signed on 26 May Furthermore, a political office holder or high-ranking public official is 1997 and ratified by Portugal on 10 March 2000. also subject to criminal liability if, while performing his duties or due to • The EU Convention on the Protection of the Financial Interests of the his duties, gives or promises (by himself or through a third party with his Communities and Protocols, entered into force on 17 October 2002. consent or approval) to a public official, to a political office holder or to a high ranking public official, or to a third party with any of those persons’ 2 Foreign and domestic bribery laws knowledge, an undue financial or other advantage, in order to lead the political office holder or public official to act or omit to act, regardless of Identify and describe your national laws and regulations whether that conduct or omission breaches the political office holder or prohibiting bribery of foreign public officials (foreign bribery public official’s duties (article 18(3) of Law No. 34/87). laws) and domestic public officials (domestic bribery laws). Additionally, the political office holder or the high-ranking public -offi Portugal has had anti-corruption legislation in place since 1995 when ‘active cial that, while performing his duties or due to his duties, requests, receives and passive corruption’ was criminalised. In fact, the first criminal offences or agrees to receive (by himself or through a third party with his consent or were included in the Portuguese Criminal Code and several autonomous approval), a financial or other advantage (for himself or for a third party), laws and regulations have been created since then. in order to act or omit to act (or to ‘reward’ a previous act or omission) This approach to legislation means that Portuguese anti-corruption in breach of the public official’s duties is also subject to criminal liability rules often overlap and are complex and frequently subject to legal pecu- under article 17(1) of Law No. 34/87). If the advantage is not due and the liarities. This makes it necessary to address each one of the laws currently act or omission does not breach the public official’s duties, the conduct is in force separately. punishable under article 17(2) of Law No. 34/87. Under articles 372 to 374, the Portuguese Criminal Code creates five Finally, article 16(1 and 2) create two additional and autonomous crim- different criminal offences in respect of public officials. inal offences: Article 372(1) of the Criminal Code criminalises the conduct of a pub- • any political office holder or high-ranking public official who, while lic official who, while performing his duties, or because of such duties, performing his duties, or because of such duties, requests or receives requests or receives (by himself or through a third party with his consent or (by himself or through a third party with his consent or approval), an approval), a financial or other advantage (for himself or for a third party). undue financial or other advantage (for himself or for a third party) Similarly, article 372(2) of the Criminal Code makes it a crime for a (article 16(1) of Law No. 34/87); and person to give or promise (even if through a third party, with that person’s • giving or promising (even if through a third party, with consent or consent or approval) to a public official, while performing his duties, or approval) to a political office holder or high-ranking public official, because of such duties, or to a third party with the public official’s knowl- while performing his duties, or because of such duties, or to a third edge, an undue financial or other advantage. party with the political office holder or high-ranking public official’s Article 373 of the Criminal Code creates two criminal offences of ‘pas- knowledge, an undue financial or other advantage (article 16(2) of Law sive corruption’. Under article 373(1), whenever a public official requests, No. 34/87). receives or agrees to receive (by himself or through a third party with his consent or approval), a financial or other advantage (for himself or for a Law No. 100/2003 of 15 November 2003 (most recent amendment: third party), in order to act or omit to act (or to ‘reward’ a previous act or Rectification No. 2/2004 of 3 January) creates, also autonomously, criminal omission), when the act or omission breaches the public official’s duties. offences in respect of military officials. If the act or omission does not breach the public official’s duties and the On the one hand, anyone who gives or promises (by himself or through advantage is not due, the conduct is criminalised under article 373(2). a third party with his consent or approval) a military official or employee or www.gettingthedealthrough.com 167 PORTUGAL PLMJ – Sociedade de Advogados, RL a third party, with any of those persons’ knowledge, an undue financial or As regards criminal offences described in the Portuguese Criminal other advantage, as a ‘reward’ for an act or omission on breach of the duties Code, article 386 offers a definition of public official. This definition inherent to any of those persons’ duties or activities and that constitutes a includes, among others: danger to national security, may be punished under article 37 of Law No. • a magistrate, public official, agent or equivalent of the European 100/2003). Union, regardless of his nationality or place of residence; On the other hand, the conduct of a military official or employee • a public official of any other member state of the European Union, who requests, receives or agrees to receive (by himself or through a third whenever the offence is committed, in whole or in part, in Portugal. party with his consent or approval) an undue financial or other advantage (for himself or for a third party), as a ‘reward’ for an act or omission that The same equivalence is made in respect of the concept of ‘political office breaches the duties inherent to his duties or activity and that constitutes holder’ in Law No. 34/87, which includes, under article 3: a danger to national security, is also criminalised (article 36 of Law No. • a European Union political office holder, regardless of his nationality 100/2003). or place of residence; Notwithstanding the above, corruption is also punishable in the pri- • a political office holder of any other member state of the European vate sector. In fact, Law No. 50/2007 of 31 August 2007 establishes crimi- Union, whenever the offence is committed, in whole or in part, in nal liability for unsporting conduct. Portugal. Article 9 of this law criminalises ‘active corruption’: anyone who gives or promises (by himself or through a third party with his consent or Finally, Law No. 20/2008, under article 7, specifically mentions that the approval) to a sports agent or to a third party with the sports agent’s knowl- relevant ‘public official’ can be domestic, foreign or of an international edge, an undue financial or other advantage, to commit an act or omission organisation and that the ‘political office holder’ can also be domestic or meant to modify or manipulate the outcome of a sports competition. foreign. ‘Passive corruption’ is, on the other hand, criminalised under article 8: any sports agent that requests, receives or agrees to receive (by himself 5 Travel and entertainment restrictions or through a third party with his consent or approval), an undue financial To what extent do your anti-bribery laws restrict providing or other advantage (for himself or for a third party), in order to act or omit foreign officials with gifts, travel expenses, meals or to act in a way intended to modify or adulterate the outcome of a sports entertainment? competition. Law No. 20/2008 of 21 April 2008 creates criminal offences of corrup- One of the main concerns of Portuguese companies is, in fact, the extent tion in international trade and in the private sector. of hospitality the company is legally allowed to provide to its customers, Under article 9 of Law No. 20/2008, it is an offence for a person to employees and business partners. give or promise (even if through a third party, with that person’s consent In this regard, it is an unarguable fact that Portuguese law does not or approval) to a private sector employee or to a third party with his knowl- aim to prohibit hospitality or the allocation of bonuses as long as they are edge, an undue financial or other advantage, in order to lead the employee considered reasonable. The touchstone is the specific circumstances that to act or omit to act in breach of the duties inherent to his functions or underlie the hospitality, as well as the level of influence the person receiv- activities. ing it has on the business decision in question. It is also a criminal offence, under article 8 of Law No. 20/2008, if a This means that gratuities and acts of hospitality cannot appear to private sector employee requests, receives or agrees to receive (by himself represent any form of pressure or influence on the decision of the person or through a third party with his consent or approval), a financial or other receiving them and should always be kept within reasonable limits of what advantage (for himself or for a third party), in order to act or omit to act in is commonly and socially accepted. breach of the duties inherent to his functions or activities. Among the acts of hospitality and bonuses that are consistent with Finally, article 7 of Law No. 20/2008 makes it a crime for a person to commercial practices commonly accepted are, for instance, the following: give or promise (even if through a third party, with that person’s consent • casual offering of lunch or dinner in the context of the company’s or approval) to a public official (domestic, foreign or of an international business; organisation) or to a political office holder (domestic or foreign) or to a • sporadic supply of tickets to sporting or arts events, as a demonstration third party with the knowledge of one of those persons, an undue financial of good business relations; or other advantage, in order to obtain or maintain an agreement, a contract • travel expenses of trading partners; and or any other undue advantage in international trade. • gifts of low value, such as merchandising or small promotional items.
Foreign bribery To ensure that the rewards and hospitality provided fall within this crite- rion of reasonableness, hospitality and bonus practices should be evalu- 3 Legal framework ated in light of common sense and, mainly, it ought to be clear that there is Describe the elements of the law prohibiting bribery of a no intention of influencing a decision and that the hospitality or gratuity is foreign public official. not capable of undermining the free will of the beneficiaries. It is perfectly acceptable to provide a gratuity or an act of hospitality aimed, for instance, Portuguese law has no specific provision regarding bribery of a foreign at fostering good business relations, improving the commercial image of public official. the company, its products or services, or if it corresponds to a common However, as detailed below, when it comes to a possible legal defini- practice in the sector. tion of ‘foreign public official’, article 386 of the Portuguese Criminal Code, The reasonableness of gratuities and acts of hospitality depends heav- article 3 of Law No. 34/87 and article 7 of Law No. 20/2008 include, in the ily on an analysis of the specific circumstances of the case. Nevertheless, corresponding definitions of ‘public official’ and ‘political office holder’, a what is clearly considered restricted is, for instance, hospitality or gratui- series of references that can be read as a notion of a ‘foreign public official’, ties offered on a reciprocal basis; bonuses granted in cash or the equiva- (even though such definition is not defined by a specific law). lent (ie, vouchers, bonds, etc); entertainment of a sexual or similar nature; Bribery of a foreign public official will thus be directly reliant on the bonuses to employees and public officials and their families (unless this is specific provisions of each one of the above-mentioned laws. For these the social practice in the country concerned). purposes, bear in mind the considerations in question 4 in respect of the In general terms, we should assume that Portuguese law does not con- definition of a foreign public official. sider conduct consistent with socially accepted customs to be relevant in criminal terms. 4 Definition of a foreign public official Although Portuguese Law does not point out specific thresholds How does your law define a foreign public official? concerning bribery, there are some concrete guidelines that should be followed. Though Portuguese law does not offer a concrete definition of a foreign According to the Portuguese Council for Prevention of Corruption in public official, several legal references are made to what may be assumed 2011, socially accepted practices include offers that are of an institutional as the relevant definition of foreign public official for criminal purposes. level and of small value, which some authors consider may correspond to the legal definition used for property crimes of €102.
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In 2012, the Portuguese Ministry of Justice announced a proposal for a investigating (possibly with the cooperation of the police) and prosecuting framework law for the creation of a Code of Conduct and Ethics for Public bribery offences. Administration, under which offers must not exceed a maximum value of However, the Central Department of Investigation and Prosecution €150. (DCIAP), was created in August 1998 as a multidisciplinary organisation Under the strict rules of the Health Law, offers of gifts to health profes- directly dependent on the Attorney General’s Office – the highest body of sionals must constitute objects of insignificant value which, according to the Portuguese Public Prosecution Service. the Minister of Health in October 2014, must not exceed €60. This department is exclusively responsible for investigating and prosecuting bribery offences whenever the criminal activity occurs in a 6 Facilitating payments different area of the country or, by order of the Attorney General, when- Do the laws and regulations permit facilitating or ‘grease’ ever the complexity or territorial dispersion of the offences justifies a centralised investigation. DCIAP may be assisted by criminal police bod- payments? ies (Polícia Judiciária, Polícia de Segurança Pública and Guarda Nacional Facilitation payments are common in some countries, made to expedite cer- Republicana), which are functionally dependent on it, notwithstanding tain routine steps that the public official has a clear and non-discretionary their technical and tactical autonomy. In fact, there is a range of measures duty to perform. that may be delegated to the police bodies. However, in Portugal, facilitation payments fall under the scope of the Trial is committed to a judicial court (usually, a court specialising in acts prohibited by the legislation against bribery. criminal matters).
7 Payments through intermediaries or third parties 11 Leniency In what circumstances do the laws prohibit payments through Is there a mechanism for companies to disclose violations in intermediaries or third parties to foreign public officials? exchange for lesser penalties? As set out in question 2, in Portugal all bribery offences can be committed In respect of criminal offences of corruption, Portuguese law does not through a third party (‘by himself or through a third party’). establish any sort of disclosure mechanisms that guarantee the company Moreover, Portuguese law also considers anyone who commits the an application of a lower sanction. offence through a third party to be ‘the principal’ of a crime, as long as the However, article 374-B of the Portuguese Criminal Code and article third party does not have the ‘criminal intent’ (eg, when the third party acts 19-A of Law 34/87 establish an exemption from the penalty if the defend- under coercion or in error) – article 26 of the Criminal Code. ant denounces the crime within 30 days of its commission and if no crimi- nal proceedings are already pending by the time the disclosure is made. 8 Individual and corporate liability In addition and also according to the said articles, a penalty must not be applied whenever the person, before the crime is committed: Can both individuals and companies be held liable for bribery • voluntarily renounces the offer or promise once accepted; of a foreign official? • returns or asks for the return of the advantage or, if fungible (that is, Under the Portuguese Criminal Code, both individuals and companies such a kind as to be freely replaceable), the respective value; or may be prosecuted for bribery of a foreign official in respect of the crimi- • withdraws or refuses the offer. nal offences contained in articles 372 and 374 of the Criminal Code (article 11(2) of the Criminal Code). 12 Dispute resolution A similar provision is established for the criminal offences of Law No. Can enforcement matters be resolved through plea 20/2008 (article 4). agreements, settlement agreements, prosecutorial discretion The remaining offences can only be committed by individuals. or similar means without a trial? In fact, a company’s liability must be expressly established by law, since it is an exception to the general rule according to which only individu- Portuguese criminal procedure assumes the ‘principle of legality’ as a main als can be criminally liable (article 11(1) of the Criminal Code). It means procedural principle. that a legal entity can be held criminally liable for certain offences, when- This means that the public prosecutor is forced to initiate an investi- ever expressly established by law and mainly in the circumstances set out gation whenever he receives notice that a crime has been committed (the under article 11 of the Criminal Code: sole exception being private crimes in the broad sense, where a complaint • If those offences are committed on behalf of the corporate or legal is required). entity and in its collective interest by anyone with a leadership posi- The public prosecutor is also under a duty to prosecute whenever suf- tion, that is members of its corporate bodies, representatives and who- ficient evidence is gathered, during the inquiry, that the requirements on ever has the authority to control its activity. which the application of a criminal sanction depends are fulfilled (the sole • If the crime is committed by someone acting under the authority of exception being private crimes in the strict sense, where private prosecu- those with a leadership position, by virtue of a breach of the duties of tion is required). supervision or control for which they are responsible (unless the crimi- The principle of legality means that our law does not recognise any nal actions are carried out against orders or instructions of the compe- means of resolving criminal matters by ‘bargaining’. Nonetheless, there tent body or individual). are some legally recognised deviations to this principle. Article 280 of the Portuguese Criminal Procedure Code establishes 9 Civil and criminal enforcement that the Public Prosecutor, at the end of the investigatory phase, may close Is there civil and criminal enforcement of your country’s the proceedings if he concludes all the conditions that could lead to the application of an exemption from the penalty later at trial are met. This foreign bribery laws? exemption is applicable to the offences punishable with imprisonment not Bribery is a criminal offence, thus enforcement of bribery laws will take exceeding six months or fine not exceeding 120 days, if: place through criminal proceedings. However, anyone who causes damage • the gravity of the facts and the culpability of the defendant are low; to a third party is responsible for repairing such damage, thus, any party • the damage is compensated or repaired; and that considers it has suffered a loss or damage may seek adequate compen- • the exemption does not compromise the purposes of prevention. sation (principally by joining the criminal proceeding as a civil party or, in some exceptional circumstances, by means of separate civil proceedings). This decision must be agreed with by an investigating judge, who can also dismiss the proceedings if, once the defendant has already been pros- 10 Agency enforcement ecuted, he considers the requirements are fulfilled. What government agencies enforce the foreign bribery laws The Portuguese Criminal Procedure Code also establishes the ‘provi- sional suspension of the proceedings’, under article 281. Under this rule, and regulations? the public prosecutor must ‘provisionally suspend the proceedings’ if the There is no specific government agency in Portugal responsible for the offence is punishable with imprisonment not exceeding five years or with a enforcement of bribery laws. Public prosecutors are responsible for sanction other than imprisonment and: www.gettingthedealthrough.com 169 PORTUGAL PLMJ – Sociedade de Advogados, RL
• both the defendant and the complainant (in general terms, the On the other hand, under Law No. 34/87, individuals may be punished offended party) agree with its terms; with: • there is no prior conviction or prior ‘provisional suspension’ for a crime • imprisonment up to five years or fine up to 600 days when giving or of the same nature; promising the political office holder an undue advantage (article • a security measure of internment in a mental institution is not applica- 16(2)); ble (lack of capacity); • imprisonment from two to five years when giving or promising an • the culpability of the defendant is not high; and advantage for an act or omission that breaches the political office • the defendant’s compliance with the prohibitions and rules imposed holder’s duties (article 18(1)); and on it is deemed sufficient to accomplish the purposes of prevention. • imprisonment up to five years, when it does not breach the political office holder’s duties (article 18(2)). Under article 282 of the Criminal Procedure Code, the suspension has, in principle, a maximum term of two years, during which the defendant must Finally, according to Law No. 20/2008, individuals are punishable for brib- comply with certain prohibitions and rules – which may include, for exam- ery offences with imprisonment from one to eight years when giving or ple, the reparation of the damage caused to the victim. If the defendant promising the public official or political office holder an undue advantage respects the rules imposed and commits no other crime during the period in order to obtain or maintain an agreement, a contract or any other undue of the suspension, the proceedings are closed. advantage in international trade (article 7). An imprisonment penalty of up to one year can be replaced by a pen- 13 Patterns in enforcement alty that does not imply deprivation of freedom, subject to certain require- Describe any recent shifts in the patterns of enforcement of the ments (principally if the purposes of prevention are not compromised) – articles 43 to 46 of the Criminal Code. foreign bribery rules. If the sentence is up to five years, it can be suspended if the purposes Since 1 January 2002 (when Law No. 108/2001, of 28 November, entered of prevention are not compromised; the suspension can be subject to the into force), the law specifically establishes that, in respect of bribery imposition of certain injunctions and rules (articles 50 to 52) or of probation offences established in articles 16 to 18 of Law No. 34/87 (see question 2), orders (articles 53 and 54 of the Criminal Code). public officials include not only Portuguese public officials, but also EU If the defendant could be sentenced to imprisonment up to two years, political office holders, regardless of their nationality or place of residence, the penalty may be replaced by community service if the purposes of and political office holders of any other EU member state, whenever the prevention are not compromised (articles 58 and 59 of the Criminal Code). offence is committed, in whole or in part, in Portugal. A fine can also be replaced by community service, if the purposes of Furthermore, Law No. 59/2007, of 4 September, established possi- prevention are not compromised and upon the defendant’s request (article ble criminal punishment of companies in respect of criminal offences of 48 of the Criminal Code). It can also be replaced, if the defendant could bribery in the Portuguese Criminal Code. be sentenced to a fine up to 240 days, if the purposes of prevention are not Finally Law No. 20/2008, of 21 April, implementing Framework compromised by a mere admonition and if the damage caused has been Decision No. 2003/568/JAI, of 22 July, created the above-mentioned repaired (article 60 of the Criminal Code). offence of corruption in international trade, also establishing companies’ Apart from that, and subject to several requirements, an offence criminal liability for the commission of this offence. committed by a public official or political office holder can determine the prohibition or suspension of his duties (articles 66 to 68 of the Criminal 14 Prosecution of foreign companies Code). Companies can only be punished with a principal penalty of fine or In what circumstances can foreign companies be prosecuted dissolution (and with several ancillary penalties, including a ban on con- for foreign bribery? tinuing its activity or making contracts with Portuguese state-owned or In general terms, the jurisdiction of the Portuguese courts and the appli- related entities) (article 90-A(1 and 2) of the Criminal Code). cation of Portuguese criminal law are restricted to crimes committed in Whenever the law does not establish a fine for the offence, the impris- Portugal, either by Portuguese or foreign citizens or companies. onment penalty established is converted into a fine (a month in prison is The Portuguese Criminal Code includes some exceptions to this general equivalent to 10 days of fine) (article 90-B (1 and 2) of the Criminal Code). rule, but none is applicable to a situation of a foreign company bribing a If the company should be sentenced to a fine up to 240 days, the court foreign public official, unless the representatives of the foreign company can decide to apply a mere admonition, if the purposes of prevention are are found in Portugal, the crime allows extradition and the extradition not compromised and if the damage caused has been repaired (article cannot be granted or it is decided not to execute a European arrest warrant 90-C of the Criminal Code). The fine can also be replaced by a good con- or any other international cooperation measure (article 5(1) f)). duct bond (from €1,000 to €1 million for a period of one to five years), if it As regards corruption in international trade, a foreign company can should be applied in no more than 600 days (article 90-D of the Criminal be prosecuted for bribing a foreign public official, an official of an inter- Code). In this situation, it can also be replaced by the mere obligation of national organisation or a foreign political office holder if its representa- having a judicial representative auditing its activity, for a period of one to tives are found in Portugal, regardless of where the criminal offence was five years (article 90-E of the Criminal Code). committed (article 3(a) of Law 20/2008). 16 Recent decisions and investigations 15 Sanctions Identify and summarise recent landmark decisions or What are the sanctions for individuals and companies violating investigations involving foreign bribery. the foreign bribery rules? According to the annual report of the Attorney General of the Republic Portuguese law establishes different penalties for individuals and compa- concerning the year 2012, the number of complaints related to bribery saw nies that commit ‘passive corruption’ offences in respect of a foreign public a significant increase – 1,895 complaints were made. official. The allegations of corruption and fraud made on the website of the In fact, according to the Portuguese Criminal Code, individuals are Portuguese Public Prosecution Service gave rise to 34 criminal investigations. punishable with: On the other hand, the annual report of the Attorney General of the • imprisonment up to five years or fine up to 600 days when giving or Republic concerning the year 2013 has not yet been published. However, promising the public official an undue advantage (article 372(2)); the collected data point out that the number of complaints made is circa • imprisonment from one to five years when giving or promising an 2,361 and the number of criminal investigations is circa 33. advantage for an act or omission that breaches the public official’s Despite this information, there is no official register that enables us to duties (article 374(1)); and determine which of the initiated proceedings involves foreign bribery. • imprisonment up to three years or fine up to 360 days when giving or promising an advantage for an act or omission that does not breach the public official’s duties (article 374(2)).
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Financial record keeping the company’s statutory auditor must deliver an annual report, an opinion issued with reference to the account documents, as well as a legal certifica- 17 Laws and regulations tion of the accounts. Third, an annual general meeting of the quotahold- What legal rules require accurate corporate books and records, ers or shareholders (as applicable) must be held no later than three months effective internal company controls, periodic financial after the financial year’s end (ie, as a rule by 31 March of each calendar statements or external auditing? year), to pass a resolution approving the accounts and the proposal of allo- cation of the results. The annual accounts are directly submitted to the In accordance with the Commercial Code, enacted by Letter of Law of 28 Tax Authority by the company’s chartered accountant, by the 15th day of June 1888, as most recently amended by Decree-Law No. 62/2013, of 10 the seventh month following the end of the tax year. May 2013, commercial companies are under the duty to have minute books containing all the minutes of meetings held by the company’s sharehold- 18 Disclosure of violations or irregularities ers, managers and directors and other corporate bodies, which must be recorded and duly signed. To what extent must companies disclose violations of anti- The Portuguese Companies Code (PCC), enacted by Decree-Law No. bribery laws or associated accounting irregularities? 262/86, of 2 September, as most recently amended by Law No. 66-B/2012, Resolution of the Assembly of the Republic of Portugal No. 47/2007, of 21 of 31 December, provides for a right to information on the part of quota- September, approved the United Nations Convention against Corruption holders in respect of all management decisions, in the following terms of 31 October 2003. (as per article 214): the managers of private companies limited by quotas Article 12 of the convention provides that each signatory state must (quota companies) must submit truthful, complete and clear information introduce measures, in accordance with the fundamental principles of its on the management of the company to any partner requesting it, and must domestic law, to prevent corruption involving the private sector, enhance also make the respective accounts, books and documents available for accounting and auditing standards in the private sector and, where appro- consultation at the company’s registered offices. priate, provide effective, proportionate and dissuasive civil, administrative The same duty is placed on directors of companies limited by shares or criminal penalties for failure to comply with such measures. Measures (share companies), according to article 288 of the above code. In fact, any to achieve these ends may include, inter alia: ensuring that private enter- shareholder who owns shares corresponding to at least 1 per cent of the prises, taking into account their structure and size, have sufficient internal share capital may, provided he or she has just cause, consult the following auditing controls to assist in preventing and detecting acts of corruption at the company’s registered offices: and that the accounts and required financial statements of such private (i) the annual report and financial statements required by law, relating enterprises are subject to appropriate auditing and certification procedures to the previous three financial years, including statements of opinion (article 12(2), paragraph f). from the supervisory board, the audit committee, general and super- Furthermore, and in order to prevent corruption, each signatory state visory council or the committee for financial matters, and also any must introduce such measures as may be necessary, in accordance with reports from the statutory auditor which are subject to publication, its domestic laws and regulations regarding the maintenance of books under the terms of the law; and records, financial statement disclosures and accounting and auditing (ii) the notice of meeting, minutes and attendance lists of general and standards, to prohibit the following acts carried out for the purpose of com- special meetings of shareholders and meetings of bondholders held mitting any of the offences established in accordance with this convention: in the previous three years; • the establishment of off-the-books accounts; (iii) the total value of remuneration paid in relation to each of the previous • the making of off-the-books or inadequately identified transactions; three years to members of the corporate bodies; • the recording of non-existent expenditure; (iv) the total amounts paid in relation to each of the previous three years • the entry of liabilities with incorrect identification of their objects; to the 10 employees of the company who received the highest remu- • the use of false documents; and neration (if the workforce exceeds 200) or the five employees of the • the intentional destruction of book-keeping documents earlier than company who received the highest remuneration, if the workforce is provided for by the law (No. 3). 200 or fewer; and (v) the share registration document. In spite of the above, it must be pointed out that, in accordance with article 422(3) of the PCC, the company’s statutory auditor and the members of It should be noted that the accuracy of the items referred to in paragraphs the supervisory board must pass on to the Public Prosecution Service any (iii) and (iv) must be certified by the statutory auditor, if the shareholder wrongful facts which have come to their knowledge and which constitute so requires. public crimes, as is the case of bribery. The very same duty falls upon the From a corporate governance structure perspective, we should point chairman of the audit committee of share companies (if any) – article 423- out that quota companies are not obliged to have a supervisory board or G(3) of the PCC. a sole auditor, save when, in two consecutive years, two of the following In fact, and in general terms, the members of the corporate bodies three thresholds are exceeded: with supervisory powers must execute their duties in the interests of the • a total balance sheet in excess of €1.5 million; company, executing proper care and employing high standards of profes- • a total turnover and other revenues of €3 million; and sional diligence and loyalty (under article 64(2) of the PCC). • an average of 50 employees throughout the year. It should also be understood that the same duty of disclosure – both with regard to bribery actions and associated accounting irregularities – As for share companies, and on the contrary, the appointment of a super- falls upon the managers or directors of private companies, considering the visory board or at least a sole auditor (with an effective and an alternate extent of their obligations towards the companies, as set out in article 64 member) is required. Moreover, if a company exceeds two of these thresh- of the PCC, as follows: their duty of care towards the organisation, display- olds – total balance sheet of €100 million; total net sales and other reve- ing willingness, technical competence and an understanding of the com- nues of €150 million; or average number of 150 employees throughout the pany’s business that is appropriate to their role, and executing their duties financial year – over two consecutive years, it will be considered a major with the diligence of a careful and organised manager; and their duty to share company and subject to the applicable framework. This means that, be loyal to the interests of the company, serving the long-term interests of if that is the case, some changes must be made to the corporate governance the partners and taking into account the interests of other relevant parties model of the company, mainly as to the respective supervisory and audit such as employees, clients and creditors in ensuring the sustainability of structure. the company. Finally, pursuant to Decree-Law No. 158/2009, of 13 July, as most recently amended by Law No. 83-C/2013, of 31 December, both share 19 Prosecution under financial record keeping legislation companies and quota companies must submit annual (or quarterly in the case of public companies) accounting statements. The internal approval Are such laws used to prosecute domestic or foreign bribery? and public submission of company’s accounts must follow these steps: We understand that the rules mentioned above were created to prosecute first, the management report, balance sheet, profit and loss account and both domestic and foreign bribery, as long as there is, of course, some pertaining annexes must be prepared and signed by all the directors of the sort of relevant connection with the Portuguese company at issue, whose companies in office at the time the documents are to be submitted. Second, www.gettingthedealthrough.com 171 PORTUGAL PLMJ – Sociedade de Advogados, RL interests the law is intended to safeguard. Nonetheless, specific provisions 23 Prohibitions on the territorial application of the laws must be assessed and complied Does the law prohibit both the paying and receiving of a bribe? with on a case-by-case basis. The law does prohibit both paying and receiving a bribe, as detailed in 20 Sanctions for accounting violations question 2 above. The first scenario is relevant for ‘active corruption’, while the second for ‘passive corruption’. What are the sanctions for violations of the accounting rules associated with the payment of bribes? 24 Public officials From a corporate law point of view, failure to comply with the legal proce- How does your law define a public official and does that dural requirements applicable to the management report and the annual definition include employees of state-owned or state- accounts – whatever the cause may be – causes the resolutions passed by controlled companies? the quotaholders or shareholders (as applicable) in respect of the report and accounts to be voidable. In such event, the quotaholders/sharehold- Portuguese law does not offer a definition of public official. However, ers may apply to the courts for the annulment of the resolution, provided article 386 of the Portuguese Criminal Code considers as public officials: such application is submitted within 30 days of its approval (or, in the case • civil officials; of a written resolution, as from the third day following service of the min- • administrative agents; utes, or, in the absence of the quotaholders/shareholders, from the date • arbitrators, juries or experts; that they become aware of such resolution, provided certain conditions are • employees or staff (even if unpaid or temporary) that hold any position met). in administrative or judicial public activities or in a public utility body; Attention must also be paid to the fact that, as a result of the non- and compliance with such duties, both the statutory auditor and the managers • managers, members of the supervisory bodies and employees of or directors of the companies in question are liable towards them (meaning public, nationalised, state-owned, state-controlled companies or of a their shareholders) – articles 72 and 81 of the PCC. public services concession-holder company. Article 519 of the PCC establishes that individuals may also be crimi- nally punished if any false information related to the company is provided Equivalent descriptions can be deemed included in Law no. 34/87 (article to a third party (if those individuals are legally obliged to provide that 3) and in Law no. 20/2008 (article 7). information) – with up to three months’ imprisonment and with a fine up to 60 days, unless the same conduct is more severely punished by another 25 Public official participation in commercial activities law. Can a public official participate in commercial activities while From a criminal law point of view – reference being made to the serving as a public official? Portuguese Criminal Code, article 256 – individuals and companies may also be held criminally liable for ‘forgery of documents’, if the intention is: Public functions should be carried out on an exclusive basis. For this rea- • to cause a loss to a third party or to the state; or son, the general principle is a prohibition on carrying on public and private • to obtain (for themselves or a third party) an unlawful benefit; or activities simultaneously (articles 19 and 20 of the General Labour Law in • to prepare, facilitate, execute or conceal the commitment of another Public Functions, enacted by Law No. 35/2014, of 20 June). However, this criminal offence. rule is subject to exceptions as per articles 21 to 24 of the General Labour Law in Public Functions. With reference to credit institutions and financial companies, forgery In fact, the law allows a public official to carry on public and private of accounts and the failure to maintain an organised accounting, as well activity if a prior authorisation is granted and, in general terms, if that as the failure to comply with any other accounting rules applicable may private activity is considered as not being capable of jeopardising the pub- be also considered as an administrative offence (article 211 (1) (g) of the lic interest inherent to the public official’s public functions and duties. General Regime for Credit Institutions and Financial Companies, enacted Despite the specific prohibitions provided for in the General Labour Law in by Decree-Law No. 298/92, of 31 December, as most recently amended by Public Functions, there is a ‘general clause’ regarding private activities: the Decree-Law No. 157/2014, of 24 October), if that forgery or failure seriously Law states that the exercise of public functions cannot be combined with interferes with an accurate assessment of the asset or financial position of private functions or commercial activities carried out in an autonomous or the company. subordinate employment regime (with or without remuneration) which are competitive, similar or conflicting activities when compared to the public 21 Tax-deductibility of domestic or foreign bribes official’s public functions. Do your country’s tax laws prohibit the deductibility of domestic or foreign bribes? 26 Travel and entertainment Describe any restrictions on providing domestic officials Pursuant to the Portuguese Corporate Income Tax Code, enacted by with gifts, travel expenses, meals or entertainment. Do the Decree-Law No. 442-D/88, of 30 November, as most recently amended by Decree-Law No. 162/2014, of 31 October, expenditures incurred in viola- restrictions apply to both the providing and receiving of tion of Portuguese criminal law (even if outside its territorial scope of appli- such benefits? cation) are non-deductible for tax purposes. Thus it is our understanding In general terms, gifts and gratuities are prohibited. However, it is consid- that both domestic and foreign bribes are not deductible in Portugal for ered that those that are socially accepted and usual according to tradition tax purposes. and local customs are not relevant for criminal purposes. (See question 5.)
Domestic bribery 27 Gifts and gratuities 22 Legal framework Are certain types of gifts and gratuities permissible under your Describe the individual elements of the law prohibiting bribery domestic bribery laws and, if so, what types? of a domestic public official. In general terms, gifts and gratuities that are socially accepted and usual The relevant laws regarding bribery of (domestic or foreign) public official according to tradition and local customs are not relevant for criminal are the Criminal Code (articles 372(2) and 364), Law No. 34/87 of 16 July purposes. (See question 5.) 1987 (articles 16(2) and 18) and Law No. 20/2008 of 21 April 2008 (article 7), as described in question 2. Law No. 100/2003 of 15 November 2003 creates 28 Private commercial bribery bribery offences in respect of military officials (see question 2). Does your country also prohibit private commercial bribery? Yes. See question 2 regarding Law No. 50/2007 of 31 August and Law No. 20/2008 of 21 April.
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29 Penalties and enforcement What are the sanctions for individuals and companies violating Update and trends the domestic bribery rules? The current global and domestic economic situation has had a major impact on the investigation and prosecutions of white- The penalties for foreign and domestic bribery are the same (see question collar crimes. Administrative offence proceedings related to the 15). Portuguese financial system and institutions have increased and the Specifically regarding Law No. 100/2003 of 15 November, active cor- General Law on Administrative Offences is subject to a proposed ruption of an airforce or any other military force’s official or employee is amendment (aimed principally at reinforcing and facilitating the punishable with imprisonment from one to six years. For this crime, only investigation and prosecution of offences). individuals can be criminally liable. On the other hand, companies are becoming aware of the need to implement a strong internal compliance programme, as well as 30 Facilitating payments a zero-tolerance policy towards corruption and corporate crimes. This is also owing to the fact that internal guidelines are powerful Have the domestic bribery laws been enforced with respect to weapons when it comes to any defence of the company. facilitating or ‘grease’ payments? Portuguese law does not distinguish facilitation payments from other bribes, see question 6. in which the former Portuguese Prime Minister was detained within the scope of a process of corruption, money laundering and tax fraud. The case 31 Recent decisions and investigations is still in the investigative phase – which is why there has not yet been a prosecution. Identify and summarise recent landmark decisions and Finally, one of the most high-profile cases involving bribery laws cur- investigations involving domestic bribery laws, including any rently being investigated relates to the purchase contract for submarines investigations or decisions involving foreign companies. made between the Portuguese state and a German manufacturing con- The most recent high-profile criminal case is related to the investigation sortium. Several companies and individuals were investigated for crimes of a major group of Portuguese companies, principally as regards busi- of corruption, money-laundering, fraud and tax evasion and misconduct in ness relationships established with state-owned or part owned companies. office, among other s. However, in December 2014, the Attorney General’s Several companies and individuals were accused and convicted of crimi- Office confirmed the closing of the case without further action. The -dis nal association, corruption, influence-peddling and fraud, among other patch suggests that there was not sufficient evidence of a clear intention to crimes – this case is known as Face Oculta (Hidden Face). It should be noted benefit the German consortium manufacturer of submarines. In addition, that the Prosecutor’s Office accused 36 defendants, including two compa- it is concluded that, if there had been corruption, malfeasance or other nies, and that the court convicted all defendants, which includes a former previous criminal acts related to the signing of the agreement for the Portuguese minister and a former president of the nation energy network acquisition submersibles, the fact would already be prescribed at the company (REN). moment. Also receiving great media coverage is the criminal case known as Caso Sócrates (Sócrates Case) or Operação Marquês (Marquis Operation),
Alexandra Mota Gomes [email protected] Dirce Rente [email protected]
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Qatar
Marie-Anne Roberty-Jabbour Lalive in Qatar LLC
1 International anti-corruption conventions person, whether directly or through an intermediary, in return of, or due To which international anti-corruption conventions is your to, an act related to his job, and for the purpose of realising an interest to a third party. country a signatory? According to the provisions of the Penal Code, bribery of a public Qatar ratified the United Nations Convention against Corruption (the official is sanctioned whether the public official has accepted the bribe in UN Convention) by virtue of Decree No. 17 of 2007 under the condition order to undertake an act falling within or outside his or her function or that Qatar is not bound by paragraph 2 of article 66 of the UN Convention whether he or she has thought or has pretended that such act falls within related to arbitration and dispute referral to the International Court of his or her functions. Justice. Furthermore, by virtue of Decision No. 37 of 2012, Qatar ratified the Foreign bribery Arab Convention for Fighting Corruption dated 21 December 2010 (the 3 Legal framework Arab Convention). Describe the elements of the law prohibiting bribery of a 2 Foreign and domestic bribery laws foreign public official. Identify and describe your national laws and regulations As mentioned above, there is no specific law in Qatar governing bribery of prohibiting bribery of foreign public officials (foreign bribery foreign officials. laws) and domestic public officials (domestic bribery laws). The UN Convention explicitly requests in its article 16 that:
Bribery of foreign public officials (i) Each State Party shall adopt such legislative and other measures as There is no specific law in Qatar governing bribery of foreign public may be necessary to establish as a criminal offence, when committed officials. intentionally, the promise, offering or giving to a foreign public offi- However, the Qatari Penal Code No. 11 of 2004 (Penal Code) defining cial or an official of a public international organisation, directly or public officials does not exclude foreign public officials. Furthermore, the indirectly, of an undue advantage, for the official himself or herself or Qatari Human Resources Management Law No. 8 of 2009 (HR Law) appli- another person or entity, in order that the official act or refrain from cable to a limited type of public officials expressly provides that a public acting in the exercise of his or her official duties, in order to obtain or official may be a foreigner. retain business or other undue advantage in relation to the conduct of For information, the public officials governed by the HR Law are those international business. working in ministries, other governmental bodies and in public authorities (ii) Each State Party shall consider adopting such legislative and and institutions to the exception of: other measures as may be necessary to establish as a criminal offence, • judges, judges assistants, members and assistants of the public when committed intentionally, the solicitation or acceptance by a prosecution; foreign public official or an official of a public international organi- • officials of the Emiri Diwan; sation, directly or indirectly, of an undue advantage, for the official • officials of the diplomatic and consular services; himself or herself or another person or entity, in order that the official • members of the higher education authority; act or refrain from acting in the exercise of his or her official duties. • officials of Qatar Petroleum; and • officials of the Accounting Diwan. Furthermore, the Arab Convention provides in its article 4 that each state member shall adopt the necessary legislative and other measures to estab- In the case of bribery of a foreign public official in Qatar, the provisions lish as a criminal offence the: of the Penal Code and the HR Law (within the scope of its application as mentioned above) would apply except if: (…) (4) bribery of foreign public officials and the officials of public • there are specific provisions of a treaty to the contrary between Qatar international institutions with respect to the undertaking of interna- and other countries; in which case such provisions will prevail; or tional commercial activities within a state member. • the foreign public official benefits from diplomatic or consular immu- nity in accordance with the Vienna Convention of 1961 on diplomatic Currently, in case of bribery of a foreign public official who does not benefit relations or the Vienna Convention of 1963 on consular relations that from diplomatic or consular immunity, the provisions of the Penal Code have been ratified by Qatar; in which case, the foreign public official and the HR Law (within the scope of its application as mentioned in our will not be subject to prosecution and sanctions in Qatar. answer under question 2 above) will apply. The following elements of law should be met in order to establish the Bribery of domestic public officials violation of the laws of bribery of a foreign public official. Bribery of domestic public officials is mainly regulated by the Penal Code and the HR Law. The capacity of the public official Additional special regulations also apply on specific public officials According to the provisions of the Penal Code related to bribery of a public such as those working at the public prosecution or in the public hospital of official, the intended individual to bribe should be a public official. Qatar (Hamad Hospital). Pursuant to article 123 of the HR Law, a public official is forbidden to accept gifts, donations, gratuities, advantages, monies or others, from any
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Article 3 of the Penal Code defines ‘public officials’ as: the benefit of a foreign country including the benefit of a public agency or enterprise. ‘those performing duties for the public service as well as the persons working in ministries, other governmental bodies and public authori- Furthermore, through the ratification of the Arab Convention, Qatar also ties and institutions. The following are considered as public officials: adopted the definition of a public official provided in the said convention and which is identical to the one provided in the UN Convention (as men- • arbitrators, experts, insolvency representatives, liquidators and tioned above) except that it adds that the definition covers designated or judicial safeguards; elected public official on a permanent or temporary basis. • chairmen, board members, managers and other officials working at private associations and institutions and at cooperative associations 5 Travel and entertainment restrictions and companies in which one of the ministries, other governmental To what extent do your anti-bribery laws restrict providing bodies or public authorities or institutions participate; foreign officials with gifts, travel expenses, meals or • any person undertaking a job related to the public service upon a entertainment? delegation given by a public official; • chairmen and members of the legislative and municipal councils In case of bribery of a foreign public official who does not benefit from as well as others having a public delegation capacity, whether elected diplomatic or consular immunity, the provisions applicable to the domestic or designated. public official would in principle apply, being the provisions of the Penal Code and the HR Law. There should be no distinction on whether the job or service is perma- In this respect, Qatari law does not provide the extent to which an nent or temporary, against a compensation or not, voluntary or not. official may be provided with gifts, travel expenses, meals or entertainment. The Penal Code refers to money and benefits in general. The HR Law The end of the service or the capacity does not prevent the applica- prohibits receipt of gifts by a public official whether directly or indirectly. tion of the provisions of this law in case where the crime is committed during the term of the service or at the time of holding such capacity. 6 Facilitating payments Do the laws and regulations permit facilitating or ‘grease’ The legal element payments? The legal element is the text of law by which the act of bribery is considered punishable. Indeed, the crime of bribery is criminally sanctioned in Qatar Qatari law does not distinguish between grease and non-grease payments by mainly articles 140 and so forth of the Penal Code and article 123 of the made to public officials. The sanctions of bribery do not take into consid- HR Law. eration the value of it except for deciding, in some cases, the amount of the fine. The tangible element However, the Qatari court has the authority to render a strict or a The tangible element of the crime consists of the material elements con- lighter judgment according to the value of the bribe offered. stituting the crime of bribery and which are the following: 7 Payments through intermediaries or third parties The criminal act In what circumstances do the laws prohibit payments through One of the following acts should take place in order for the crime of bribery intermediaries or third parties to foreign public officials? to be considered as an established criminal act: • the act of requesting of a specific benefit made by the public official; In the event where the foreign public official does not benefit from diplo- • the act of acceptance by the public official of the offer or promise made matic or consular immunity, the Penal Code and the HR Law will apply. by the briber; or According to their provisions, the bribery of a foreign public official is sanc- • the act of taking the bribe by the public official. tioned whether made directly or through an intermediary or a third party. Indeed, the Penal Code provides that the same sanctions applicable to The object of the crime the public official and the briber shall also apply to the intermediary. The object of the crime is, according to the Penal Code, money or a benefit. Furthermore, article 143 of the Penal Code sanctions a person: According to the HR Law, the object of the crime is either a gift, a donation, a gratuity, an advantage or money. 1 requesting or taking monies or a benefit under the claim that it is a bribery to a public official while such person intends keeping the bribe, The purpose of the crime fully or partially; The purpose of the crime of bribery as mentioned in the Penal Code is: 2 taking or accepting monies or a benefit, with knowledge of its purpose, • to perform or refrain from performing any act falling within the public even when the public official intended by the bribe has not designated official’s job description; such person or has not known about him/her unless he/she acted as an • to perform or refrain from performing an act falling outside of the offi- intermediary in the bribe. cial’s job description while the latter mistakenly believes the contrary or pretends the contrary; or 8 Individual and corporate liability • to accept a bribe for an act falling within the official’s job description Can both individuals and companies be held liable for bribery and that was already performed or for refraining to perform such act. of a foreign official?
The intangible element Yes, both the individual and the company committing the bribery will be The intention of bribery should be established given that bribery is an sanctioned. intentional crime according to article 28 of the UN Convention. Article 37 of the Penal Code provides:
4 Definition of a foreign public official To the exception of ministries, other governmental bodies and public authorities and institutions, a legal entity shall be criminally liable How does your law define a foreign public official? for the crimes committed by its representatives, managers and agents Qatari law does not define a foreign public official. working for its account or under its name. The legal entity may only However, through the ratification of the UN Convention, Qatar be sanctioned by a fine and any other applicable sub-sanction deter- adopted the definition of a foreign public official provided therein and mined by law. In case the original sanction determined by law is not a which states: fine, the applicable sanction on the legal entity shall then be a fine not exceeding five hundred thousand Qatari Riyals. A foreign public official is any person holding a legislative, execu- tive, administrative or judicial position in a foreign country, whether This should not prevent the application of the sanctions determined by designated or elected, and any person practising a public function for law on the individual who has actually committed the crime. www.gettingthedealthrough.com 175 QATAR Lalive in Qatar LLC
9 Civil and criminal enforcement The Companies Law also imposes on some companies and in specific cases to have a board of auditors. In all cases, the company’s auditor should Is there civil and criminal enforcement of your country’s be one of those registered in the auditors register in Qatar. foreign bribery laws? The company’s managers or board of directors are required by law Not applicable since there are no foreign bribery laws in Qatar. to provide the auditor with any document requested by the latter and in case of failure to do so, the auditor should report it to the Qatar Ministry of 10 Agency enforcement Economy and Commerce. The audited financial statements of publicly listed companies are What government agencies enforce the foreign bribery laws published. and regulations? Additional requirements apply in this regard for specific type of Not applicable since there are no foreign bribery laws in Qatar. companies, such as banks and financial institutions.
11 Leniency 18 Disclosure of violations or irregularities Is there a mechanism for companies to disclose violations in To what extent must companies disclose violations of anti- exchange for lesser penalties? bribery laws or associated accounting irregularities? According to article 141 of the Penal Code, the briber or the intermediary Qatari law does not impose on companies the obligation to disclose viola- shall be exempted from sanctions in case he or she has notified the crime to tions of anti-bribery or associated accounting irregularities. the competent authorities, or has confessed the crime prior to its discovery, and even after it has been committed. 19 Prosecution under financial record keeping legislation Are such laws used to prosecute domestic or foreign bribery? 12 Dispute resolution The laws related to financial record keeping are not imposed specifically Can enforcement matters be resolved through plea for bribery, whether domestic or foreign. agreements, settlement agreements, prosecutorial discretion or similar means without a trial? 20 Sanctions for accounting violations Not applicable since there are no foreign bribery laws in Qatar. What are the sanctions for violations of the accounting rules associated with the payment of bribes? 13 Patterns in enforcement Violation of the accounting rules is sanctioned in general and not as specifi- Describe any recent shifts in the patterns of enforcement of the cally associated with the payment of bribes. foreign bribery rules. According to article 34 of the Law of Organisation of Auditors Profession No. 30 of 2004, any violation by the auditor of the accounting Not applicable since there are no foreign bribery rules in Qatar. or professional standards and rules will be sanctioned by imprisonment of up to two years and/or a fine not exceeding 50,000 Qatari riyals. 14 Prosecution of foreign companies The sanctions of the Penal Code related to bribery shall also apply. In what circumstances can foreign companies be prosecuted for foreign bribery? 21 Tax-deductibility of domestic or foreign bribes See question 8. Do your country’s tax laws prohibit the deductibility of domestic or foreign bribes? 15 Sanctions Qatari tax law does not expressly provide that bribes may not deducted. What are the sanctions for individuals and companies violating However, given that the bribe is a crime and sanctioned under Qatari law, the foreign bribery rules? the deduction of the bribe amount for tax purposes cannot be permitted. Not applicable since there are no foreign bribery rules in Qatar. Domestic bribery 16 Recent decisions and investigations 22 Legal framework Identify and summarise recent landmark decisions or Describe the individual elements of the law prohibiting bribery investigations involving foreign bribery. of a domestic public official. It is very rare for courts decisions in Qatar to be published and we have not The individual elements of the Qatari law prohibiting bribery of a domestic found any decisions or investigations involving foreign bribery. public official are those mentioned in the Penal Code. See question 3.
Financial record keeping 23 Prohibitions 17 Laws and regulations Does the law prohibit both the paying and receiving of a bribe? What legal rules require accurate corporate books and records, Yes. According to article 141 of the Penal Code, the same sanctions applica- effective internal company controls, periodic financial ble on the public official shall apply on the briber. statements or external auditing? Furthermore, according to article 145 of the Penal Code, if a person offers a bribe to a public official who refuses it, the briber shall be sanc- As a general rule, article 21 and so forth of the Qatari Commercial Law No. tioned by imprisonment up to five years and a fine not exceeding 15,000 27 of 2006 require each trader, whether an individual or a legal entity, to Qatari riyals. keep accurate books and records in a way to reflect the actual financial situ- The briber is, however, exempted from the sanctions in case he or she ation in detail. These books should be kept for a period of 10 years from informs the competent authorities about the crime or in case he or she their closing date. The trader should also keep all correspondence, e-mails confesses it prior to its discovery, and even after the crime is committed. and mails sent in relation with his, her or its trade for a period of five years. On the other hand, the Commercial Companies Law No. 5 of 2002 24 Public officials (Companies Law) provides that a company, regardless of the form under which it is established, should issue the balance sheet and the profits and How does your law define a public official and does that losses accounts at the end of each year. Furthermore, companies should definition include employees of state-owned or state- appoint an auditor who will issue audited financial accounts at the end of controlled companies? each year to be submitted for review and approval, to the company’s man- agers or board of directors and then to the company’s partners or share- Public officials are defined in article 3 of the Penal Code. Please refer to our holders in a general assembly meeting. answer under question 3 above.
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27 Gifts and gratuities Update and trends Are certain types of gifts and gratuities permissible under your In August 2013, Qatar approved the constitution of the Rule of Law domestic bribery laws and, if so, what types? and Anti-Corruption Center by virtue of the Emiri Decision No. 94 of 2013. This Center is an independent entity aiming at supporting, No types of gifts or gratuities are permissible under Qatari law. developing and expanding the rules of law and the anti-corruption laws. 28 Private commercial bribery Does your country also prohibit private commercial bribery? Yes. Article 146 of the Penal Code provides that every employee requesting Furthermore, the Arab Convention defines the domestic public official for himself or herself, or for a third party, money or a benefit, or a mere as: promise of a gift or gratuity, without the knowledge and consent of the employer, with the purpose of undertaking or refraining from undertak- any individual undertaking a public function or any individual con- ing any of the acts delegated to him or her, shall be considered subject of a sidered as a public official according to the laws of the state member bribe and shall be sanctioned with imprisonment up to three years or a fine in the field of executive, legislative, judicial and operational matters, not exceeding 15,000 Qatari riyals. whether he/she is designated or elected, permanently or temporary, or The amount of the bribe shall also be confiscated. was delegated a public service in any state member, against a compen- sation or not. 29 Penalties and enforcement
25 Public official participation in commercial activities What are the sanctions for individuals and companies violating the domestic bribery rules? Can a public official participate in commercial activities while serving as a public official? See questions 8 and 23.
According to article 123 of the HR Law, a public official (please refer to the 30 Facilitating payments scope of application of this law in question 2) may not participate in com- mercial activities which do not comply with its obligations and responsi- Have the domestic bribery laws been enforced with respect to bilities as a public official or with the interest of a governmental entity or facilitating or ‘grease’ payments? which may provide the official with a direct or indirect benefit in contracts, Please refer to our answer under question 6. works and auctions connected with the government activity or in which the Furthermore, grease payments are not usually common in Qatar. government is a party. The HR Law further adds that the official should avoid performing 31 Recent decisions and investigations any work which may lead to opposed interests between his or her personal activities and the interests and projects of the government entity or which Identify and summarise recent landmark decisions and may influence, directly or indirectly, his or her interests or those of any of investigations involving domestic bribery laws, including any its relatives up to the fourth degree. investigations or decisions involving foreign companies. There are other special laws applicable to a specific type of public It is very rare for courts decisions in Qatar to be published. official providing for the same restrictions. For instance, the Ministerial A decision based on the limited number of published court decisions Decision No. 9 of 2003 applicable to the employees of the public pros- related to bribery is the following: ecution provides in its article 91 that these employees are prevented from performing any commercial or professional activities or to have a direct or indirect interest in any works, auctions or contracts related to activities of Decision No. 172/2009 of the Criminal Court of Cassation dated the public prosecution. 15 June 2009 According to this case, based on the manager’s request, an employee 26 Travel and entertainment offered a bribe to a domestic public official to refrain from undertaking an act falling within his job description and such act was related to visa Describe any restrictions on providing domestic officials matters. The bribe has been accepted by the public official only for the with gifts, travel expenses, meals or entertainment. Do the purpose of establishing a proof of the bribe. The court has confirmed the restrictions apply to both the providing and receiving of decision of the Court of Appeal sanctioning the briber and the manager, such benefits? as an instigator. See question 5.
Marie-Anne Roberty-Jabbour [email protected]
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Vasily Torkanovskiy Ivanyan & Partners
1 International anti-corruption conventions Articles 184, 204 and 309 of the Criminal Code that respectively To which international anti-corruption conventions is your criminalise bribery in sport, commercial bribery and bribery of witnesses, interpreters, victims and experts in court and other official proceedings country a signatory? are applicable to appropriate cases of foreign bribery. The provisions of Russia is a signatory to the following international anti-corruption the Criminal Code (articles 290 and 291) that criminalise bribery of public conventions: officials apply not only to Russian state and municipal officials (including • Council of Europe Criminal Law Convention on Corruption some the officials of some state-owned entities), but also to foreign offi- (Strasbourg, 27 January 1999) (the 1999 Strasbourg Convention), cials and the officials of international organisations. It is notable that the which came into force for the Russian Federation on 2 February 2007; Criminal Code is silent on the possibility of extraterritorial application • the UN Convention against Corruption (31 October 2003) (UNCAC), of these provisions. In the absence of any relevant court practice we can which came into force for the Russian Federation on 8 June 2006; only state in general terms that nowadays the bribery of foreign state and • the UN Convention against Transnational Organized Crime (15 municipal officials is criminally sanctioned in Russia in the same way as November 2000), which came into force for the Russian Federation on domestic bribery, but applicability of these provisions ratione loci is not 25 June 2004; clear. • on 7 March 2009 the Russian Federation signed the Additional In general, according to articles 184, 204, 290, 291 and 309 of the Protocol to the Criminal Law Convention on Corruption (15 May Criminal Code, bribery takes place when there is a giving (article 184 para- 2003), but has not yet ratified it; and graphs 1 and 2; article 204 paragraphs 1 and 2; article 291; article 309 para- • the OECD Convention on Combating Bribery of Foreign Public graphs 1 and 4 of the Criminal Code) or when there is a receiving (article Officials in International Business Transactions (21 November 1997), 184 paragraphs 3 and 4; article 204 paragraphs 3 and 4; article 290) of a which came into force for the Russian Federation on 17 April 2012. consideration for the performance or non-performance of an official func- tion (in the public sector or in private sport or commercial interest) to the 2 Foreign and domestic bribery laws person that can or has to perform such function or to refrain from perform- ing such function and who is not officially entitled to such consideration. Identify and describe your national laws and regulations Most relevant to foreign bribery is the provision stipulated in article prohibiting bribery of foreign public officials (foreign bribery 169 of the Civil Code. It makes invalid ab initio transactions that are against laws) and domestic public officials (domestic bribery laws). the fundamentals of legal order and morals, for example a transaction to At the core of Russian anti-bribery legislation are the following provisions: acquire a bribe, and provides for taking of all or part of the consideration in • the Federal Law on Counteraction against Corruption (25 December such transactions into federal state ownership. 2008 No. 273-FZ); • the Federal Law on monitoring of correspondence between the 4 Definition of a foreign public official expenses of the holders of public officers and other persons, and their How does your law define a foreign public official? income (3 December 2012 No. 230-FZ); • the Federal Law on the prohibition for certain persons to open and Russia is bound by the definitions of FPOs contained in article 2(b) of maintain accounts (deposits) and to keep cash and other values with UNCAC and in article 1(c) and article 5 of the 1999 Strasbourg Convention. the foreign banks located outside the Russian Federation as well as to The definition in article 2(b) of UNCAC is the most detailed and reads: use foreign financial instruments (7 May 2013 No. 79-FZ); ‘Foreign public official’ shall mean any person holding a legislative, • articles 184, 204, 290, 291, 304 and 309 of the Criminal Code of the executive, administrative or judicial office of a foreign country, whether Russian Federation (13 June 1996 No. 63-FZ) (the Criminal Code); appointed or elected; and any person exercising a public function for a for- • articles 13 to 20 of the Federal Law on the State Civil Service of the eign country, including for a public agency or public enterprise. Russian Federation (27 July 2004 No. 79-FZ); This definition has been reproduced almost verbatim in article • article 169 of the Civil Code of the Russian Federation (Part I) (30 290 of the Criminal Code. An official of an international organisation is November 1994 No. 51-FZ) and article 575 of the Civil Code of the defined in the same article as ‘any international civil servant or any other Russian Federation (Part II) (26 January 1996 No. 14-FZ) (both parts person authorised by the international organisation to act on its behalf’. referred to as the Civil Code); and These definitions are valid for articles 290, 291 and 291.1 of the Criminal • articles 19.28 and 19.29 of the Code of the Russian Federation on Code. The same definitions have been introduced into article 19.28 of the the Administrative Offences (30 December 2001 No. 195-FZ) (the Administrative Offences Code. Administrative Offences Code). 5 Travel and entertainment restrictions Foreign bribery To what extent do your anti-bribery laws restrict providing 3 Legal framework foreign officials with gifts, travel expenses, meals or entertainment? Describe the elements of the law prohibiting bribery of a foreign public official. As soon as these benefits, given to an official, amount to bribes under the Criminal Code or the Administrative Offences Code, they are prohibited as The legal consequences of an offence of bribery of foreign officials are explained in questions 3 and 8. However, the restrictions provided for in the provided for by Russian criminal and civil legislation. other acts (such as the Federal Law on Counteraction against Corruption,
178 Getting the Deal Through – Anti-Corruption Regulation 2015 Ivanyan & Partners RUSSIA the Federal Law on the State Civil Service of the Russian Federation or Several tools exist for private individuals to achieve leniency in a crim- article 575 of the Civil Code) do not apply to any foreign officials. inal prosecution. If a person pleads guilty, article 75 of the Criminal Code (that requires application to confess to commitment of crime, remorse and 6 Facilitating payments assistance to investigation) or articles 314 to 317 of the Code of Criminal Do the laws and regulations permit facilitating or ‘grease’ Procedure of the Russian Federation (that provide for a ‘simplified’ trial, based on the confession of guilt) might be applicable. In general, those payments? tools are within the discretion of investigators, prosecutors and the court; See question 7. however, if the procedure of simplified trial is applied, the actual punish- ment cannot exceed two-thirds of the maximum punishment (article 316 7 Payments through intermediaries or third parties paragraph 7 of the Code of Criminal Procedure of the Russian Federation). The wrongdoer may also choose to cooperate with the investigation In what circumstances do the laws prohibit payments through by entering into a formal cooperation agreement with the investigators in intermediaries or third parties to foreign public officials? the course of the preliminary investigation, if the criminal sanction for the Any undue payments to an official intended to influence performance of offence that he or she has committed does not exceed 10 years’ imprison- his or her functions or to facilitate a result that is dependent on the perfor- ment. To enter into this agreement the wrongdoer shall make a full report mance of his or her functions are criminalised, regardless of the amounts of the crime committed; the article(s) of the Criminal Code applicable to of such payments. This applies regardless of whether intermediaries or this crime shall also be indicated in this agreement. The wrongdoer shall third parties were involved. An intermediary or a third party, if they acted further undertake to provide information and render cooperation to help intentionally in facilitating a bribe, shall be criminally liable under article to investigate the crimes committed by other persons. It is not sufficient to 291.1 of the Criminal Code. provide cooperation with regard to his or her own criminal activities. If the wrongdoer fulfils all his or her obligations under the valid coop- 8 Individual and corporate liability eration agreement, the court shall hold summary proceedings to issue sen- tence, which shall not exceed half (or, in exceptionally serious cases where Can both individuals and companies be held liable for bribery life imprisonment might be applicable, two-thirds) of the maximum pun- of a foreign official? ishment provided by the Criminal Code for the crime at issue. The court Companies are not subject to criminal liability according to Russian crimi- may at its entire discretion show further leniency, but is not obliged to do nal legislation (article 19 of the Criminal Code). Only individuals of 16 and so. older can be criminally liable for bribery (article 20 of the Criminal Code). It should be mentioned that the rules concerning plea bargains are Companies are liable for giving bribes under the Administrative Offences relatively new and do not provide for all practical possibilities. On 28 June Code, as explained in question 22. The legal entity can be made liable under 2012 the Supreme Court of the Russian Federation issued its Resolution this provision even if its officer faces criminal charges for the same offence. No. 16 to clarify certain provisions of the Criminal Procedure Code. This In civil law individuals and companies alike can be held liable for brib- resolution makes it clear that the court in certain cases has powers to pro- ery. In particular, a bribery transaction should be declared illegal according ceed as in the normal course of procedure, if required by the interests of to article 169 of the Civil Code. This applies to both companies and indi- justice. Although this field would benefit from more detailed regulations, viduals. Bribery can also be regarded as a tort, but it is unlikely that any cooperation agreements are already used in practice. private party would be damaged directly by an act of bribery (as opposed to any unlawful act committed by a public official for a bribe). 12 Dispute resolution Can enforcement matters be resolved through plea 9 Civil and criminal enforcement agreements, settlement agreements, prosecutorial discretion Is there civil and criminal enforcement of your country’s or similar means without a trial? foreign bribery laws? See question 11. There is both criminal and civil enforcement of the foreign bribery provi- sions in the territory of the Russian Federation. 13 Patterns in enforcement Describe any recent shifts in the patterns of enforcement of the 10 Agency enforcement foreign bribery rules. What government agencies enforce the foreign bribery laws We are not aware of any recently reported cases of foreign bribery. In and regulations? general the most up-to-date non-binding but very authoritative judicial Criminal and administrative anti-bribery provisions are enforced by the interpretation of bribery can be found in the Resolution of the Plenum state prosecutors through the courts of general jurisdiction. of the Supreme Court of the Russian Federation dated 9 July 2013 No. 24, Particular investigation of criminal bribery of state and municipal on Court Practice in the Cases of Bribery and other Corruption Crimes, officials shall be in most cases within the jurisdiction of the Investigations as amended by the resolution of the same court No. 33, dated 3 December Committee of the Russian Federation and its territorial bodies as well as 2013. within the jurisdiction of investigative bodies of the Ministry of the Interior. This resolution provides useful guidance in the cases of both domes- Investigation of sports bribery is within the jurisdiction of the Ministry of tic and foreign bribery, but on the matters of special relevance to foreign the Interior. Commercial bribery and bribery of witnesses is generally bribery (such as the definition of a foreign public official) mostly recites within the jurisdiction of the investigative bodies of the Ministry of the the statute. The guidelines of this resolution may be said to interpret some Interior, but can in some cases be investigated by the other law enforce- provisions of the Criminal Code to impose even stricter prohibitions than ment bodies (article 151 of the Code of Criminal Procedure of Russian might appear from the text of the statute itself. Federation). In the area of civil law, remedies for bribery can be claimed by an 14 Prosecution of foreign companies interested private party or, in some cases, by the state prosecutors of the In what circumstances can foreign companies be prosecuted Russian Federation. for foreign bribery? 11 Leniency The legal regime for prosecuting a foreign company in Russia is the same Is there a mechanism for companies to disclose violations in as for companies of Russian nationality: a legal entity is not subject to the criminal law. Civil liability and the liability under the Administrative exchange for lesser penalties? Offences Code can be applied by the competent Russian court, as previ- The Administrative Offences Code (article 4.2) provides for a voluntary ously described in relation to Russian companies (see questions 8 and disclosure of an offence as an extenuating circumstance. Thus a lesser fine 11). An offence of a foreign entity can only be punished in the Russian will be imposed in such case under article 19.28 (see question 22). This miti- Federation under the Administrative Offences Code, if such offence is gation of liability is wholly within the court’s discretion. committed within the Russian Federation. www.gettingthedealthrough.com 179 RUSSIA Ivanyan & Partners
15 Sanctions 26 December 1995 No. 208-FZ) and the Federal Law on Limited Liability What are the sanctions for individuals and companies violating Companies (dated 8 February 1998 No. 14-FZ). Thus in the sphere of internal accounting the Federal Law on Joint- the foreign bribery rules? stock Companies prescribes mandatory formation of the internal auditing In criminal law, depending on the nature of the crime (giving or taking commission for all joint-stock companies. This commission supervises of a bribe), the type of the official involved (acting in public or in private the financial and economic life of the company. The formation of a simi- interest) and on the severity of crime, sanctions can take the form of a lar internal body is prescribed by the Federal Law on Limited Liability fine, public works, administrative arrest, deprivation of the right to hold a Companies for limited liability companies formed of more than 15 mem- specific position or to work at a specific job, or imprisonment. In the most bers. Auditing commissions have a duty to examine annual reports and severe cases imprisonment can be for a period of 12 years. balance sheets of the company before they are approved by the general Article 19.28 of the Administrative Offences Code provides for the meeting of shareholders or members, and in a more general sense are fine, which, as a general rule, shall be up to three times as much as the obliged to supervise the financial and economic life of the company. amount of the bribe, but not less than 1 million roubles. Depending on the Competition legislation (Federal Law on the Protection of Competition amount of the bribe involved, the fine may go up to 100 times the bribe dated 26 July 2006 No. 135-FZ) makes it obligatory for corporations to amount, with an absolute maximum of 100 million roubles. The bribe shall communicate with or to report to the competition regulator in the case be confiscated. of certain intra-corporate changes as well as in the case of some inter- In civil law the following remedies are available: restitution and corporate market-affecting transactions. compensation for damage caused by the bribery. Special rules of reporting are established for non-commercial legal entities. In addition to the Law on Bookkeeping further requirements 16 Recent decisions and investigations can be found in the Civil Code of the Russian Federation (Part I) (Federal Law dated 30 November 1994 No. 51-FZ), by the Law on Non-profit Identify and summarise recent landmark decisions or Organisations (Federal Law dated 12 January 1996 No. 7-FZ), by the Law investigations involving foreign bribery. on Charitable Activities and Charitable Organisations (Federal Law dated See question 13. We are not aware of any cases involving foreign bribery 11 August 1995 No. 135-FZ), by the Law on Social Associations (Federal Law in Russia. dated 19 May 1995 No. 82-FZ) and by some other acts.
Financial record keeping Investments and securities-related reporting The Federal Law on the Securities Market (dated 22 April 1996 No. 39-FZ) 17 Laws and regulations governs, inter alia, issuance of and operations concerning shares and What legal rules require accurate corporate books and records, bonds. It requires reporting, maintaining a register and keeping and disclo- effective internal company controls, periodic financial sure of information with regard to shares. Some special rules on disclosure statements or external auditing? of information are established by the Federal Law on Mortgage Securities (dated 11 November 2003 No. 152-FZ). The system of reporting in Russia is rather complicated. Three layers of The Federal Law on Investment Funds provides for some reporting reporting provisions – provisions on bookkeeping and tax reporting, cor- and record keeping by funds, managing companies and some other related porate affairs reporting, and investments and securities related reporting entities. – are briefly described. Special reporting was introduced for some professional market partici- pants (banks, insurance and leasing companies, etc) by the Law on Counter- Bookkeeping and tax reporting measures to Legalisation (Laundering) of Criminally Drawn Income The Tax Code of the Russian Federation (Federal Law dated 31 July 1998 (Federal Law dated 7 August 2001 No. 115-FZ) (the AML Law). Anti- No. 146-FZ) (article 23) provides that corporate taxpayers have a duty money-laundering measures include, inter alia, providing the competent to submit appropriate tax reports to the tax authorities as well as book- authority with information on the wide range of operations concerning keeping reports according to the Law on Bookkeeping (Federal Law dated money and property. 21 November 1996 No. 129-FZ). Federal Law dated 28 November 2007 No. 275-FZ supplemented arti- The Law on Bookkeeping generally requires the following submissions: cle 7 of the AML Law with paragraph 1.3, requiring market participants to • balance sheet; pay additional attention to the operations of foreign officials and their close • account of financial results; relatives. On 3 June 2009 (by Federal Law No. 121-FZ) these provisions • supplements to these documents provided for by the normative acts; were re-enacted as article 7.3 of the same law. and The AML Law and various ensuing regulations also establish diligence • audit reports when mandatory auditing is provided for by federal law. requirements (know-your-client policies) for banks (article 7.2). The requirements of the AML Law are partially extended to advocates, The first two submissions are prepared quarterly as interlocutory account- notaries, law firms and firms of accountants. ing and the set in full is produced and submitted annually. That law further Other regulations issued by various government agencies are a sig- obliges some legal entities (open-type joint-stock companies, insurance nificant part of the regulation of accounting and reporting, especially with companies, banks, funds, exchanges, etc) to publish their accounts. regard to bookkeeping, tax, investment and securities-related reporting. Mandatory auditing is prescribed by article 5 of the Federal Law on Auditing Activities (dated 30 December 2008 No. 307-FZ), for, inter alia, 18 Disclosure of violations or irregularities joint-stock companies, insurance companies, banks and investment funds. To what extent must companies disclose violations of anti- Mandatory auditing can also be provided for by other federal laws. bribery laws or associated accounting irregularities? Special statements are also submitted to the state non-budgetary funds. According to paragraph 9 of article 15 of the Federal Law on There are no direct provisions establishing a duty of companies to disclose Insurance Payments to the Pension Fund of the Russian Federation, Social violations of anti-bribery laws or of associated accounting irregularities. Insurance Fund, Federal Fund of Obligatory Medical Insurance and to the However, these violations and irregularities should be reported if the Territorial Funds of Obligatory Medical Insurance (dated 24 July 2009 No. companies comply with their duties to report important information to 212-FZ) such statements shall be provided to the territorial bodies of the investors and other participants in the financial markets and to submit the Social Insurance Fund of the Russian Federation, and to the territorial correct reports and bookkeeping records to the appropriate state bodies. bodies of the Pension Fund of the Russian Federation. 19 Prosecution under financial record keeping legislation Corporate affairs reporting Corporate affairs reporting is generally prescribed by the Federal Law Are such laws used to prosecute domestic or foreign bribery? on the State Registration of Legal Entities and Individual Entrepreneurs Financial record keeping laws are used as an ancillary to the appropriate (dated 8 August 2001 No. 129-FZ) and by several laws on specific types of provisions of criminal and civil codes and other laws establishing civil, corporations, such as the Federal Law on Joint-stock Companies (dated criminal or administrative liability.
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20 Sanctions for accounting violations The Federal Law on the State Civil Service of the Russian Federation What are the sanctions for violations of the accounting rules (dated 27 July 2004 No. 79-FZ) also prohibits state civil servants from, inter alia: associated with the payment of bribes? • engaging in entrepreneurial activities or being in any way engaged It is important to distinguish between violation of bookkeeping and tax to represent any private party in the state agency where he or she is reporting provisions and violation of other types of reporting provisions. employed; Sanctions for violation of bookkeeping rules are provided for by • acquiring any interest-bearing securities or holding such securities if article 15.7 of the Administrative Offences Code. that leads to a conflict of interest; Sanctions for violation of tax-reporting provisions take the form of • being in any way engaged for remuneration without the employer’s administrative fines of various amounts and are provided for by the sixth consent or if that leads to a conflict of interest (see question 25 for more section of the Tax Code of the Russian Federation (Part I) and articles 15.3, detail); 15.4 to 15.9 of the Administrative Offences Code. • receiving from natural persons and legal entities gifts in connection to The second group includes sanctions for violation of the AML Law performance of their public duties (except for those received in con- rules, provided by the Administrative Offences Code (article 15.27) and nection with the official events amounting to less than 3,000 roubles); the AML Law itself. Article 15.27 of the Administrative Offences Code now • travelling abroad within the scope of his or her public duties at the includes four different offences against the AML rules. The wrongdoer expense of individuals and legal entities (unless otherwise provided may be subjected to a fine or administrative suspension of a company’s for by international treaties of the Russian Federation or agreed by the activity for a period of up to 90 days. The company’s executives, includ- Russian Federation state authorities and foreign state authorities and ing any responsible officers, can also be fined and prohibited from holding international and foreign organisations); certain offices for a defined period of time. The AML Law itself provides • receiving, without the written permission of the employer, awards, in particular for annulment of the company’s licence to perform specific honorary and special degrees (except for scientific ones) from foreign types of activity such as banking or lease financing. states, international organisations, political parties and other social and religious associations if he or she interacts with them in the scope 21 Tax-deductibility of domestic or foreign bribes of his or her office; • using his or her public authority in favour of political parties, other Do your country’s tax laws prohibit the deductibility of social and religious associations or other organisations or publicly domestic or foreign bribes? expressing his or her attitude to these associations and organisations if such activities are outside the scope of his or her public duties; All deductible expenditures are provided for in the Tax Code of the Russian • engaging, without the written permission of the employer, in paid Federation (Part II) (dated 5 August 2000 No. 117-FZ). Expenditure activities that are financed exclusively by foreign states, international on bribe payments is not mentioned in the Tax Code of the Russian or foreign organisations, foreign citizens or stateless individuals Federation. Moreover, transactions relating to bribe giving and receiving (unless otherwise provided by an international treaty or the legislation are void under the Civil Code of the Russian Federation (Part I). As a result of the Russian Federation); and a taxpayer cannot refer to such transactions to justify the expenditure. • being employed or working on the basis of a civil law contract in profit- making and non-profit organisations within two years after release Domestic bribery without the special commission’s consent, if he or she performed par- 22 Legal framework ticular state managing functions in the scope of his or her authority in respect of these organisations. Describe the individual elements of the law prohibiting bribery of a domestic public official. The Federal Law on the prohibition for certain persons to open and main- Such bribery is prohibited by articles 290 and 291 of the Criminal Code of tain accounts (deposits) and to keep cash and other values with the foreign the Russian Federation (the Criminal Code). banks located outside the Russian Federation as well as to use foreign To establish bribery, the prosecutor must prove: financial instruments (dated 7 May 2013 No. 79-FZ) introduces the prohi- • the receipt of or the payment in money, securities or other property or bition that its name suggests for various public officials. Violation of this pecuniary benefits, effectuated directly or through an intermediary. At prohibition is a separate ground for dismissal of the public official under least part of the bribe must be transferred for the crime to be declared paragraph 7.1 of article 81(1) of the Labour Code of the Russian Federation. completed; The idea of conflict of interest is one of the focal points of the anti- • that the bribe was given or taken for the actions in favour of the bribe- corruption provisions related to the status of civil servants. Civil servants giver or any person represented by him or her, as well as for general are responsible for settling their own conflicts of interest and the conflicts employment-related favour or connivance; of interest of their subordinates. Failure to do that may lead to dismissal • that such actions are within the scope of the bribe-taker’s authority, or for ‘loss of trust’. Similar and even more restrictive provisions have been the bribe-taker can promote such actions due to his or her authority. If introduced for other public servants and for the senior state and municipal those actions are illegal, the bribery is punished more severely; and officials that do not fall within the category of public servants. • that the bribe-taker is a public official (see question 24). Most relevant to the bribery provisions of civil legislation are article 169 and article 575 of the Civil Code. The latter regulates gifts to state and It must be mentioned that some of the corruption crimes provided for municipal officials related to performance of their functions (for details, by international treaties are not expressly proscribed by the cited articles see question 26). The former makes invalid ab initio transactions that are of the Criminal Code. In this light the question arises in the doctrine of against the fundamentals of legal order and morals, such as a transaction criminal law whether it is possible to punish these crimes under some other to acquire a bribe. Pursuant to the National Plan on counteraction against articles of the Criminal Code. corruption, a standard guidance on receiving gifts was issued by the The Administrative Offences Code now includes article 19.28, which government (Ruling No. 10 dated 9 January 2014). In the course of 2014 it prohibits providing undue advantage to an official (whether in the private has been reproduced by various state agencies. or public sector) in return for some actions or omissions in the exercise of the functions of such official. The elements of this offence are similar 23 Prohibitions to those described above in relation to the crime under article 291 of the Does the law prohibit both the paying and receiving of a bribe? Criminal Code. The official in the private sector is defined in the note to article 201 of the Criminal Code (see question 28). The only difference As indicated in question 22, both paying and receiving a bribe are pro- between this administrative offence and the crimes described above and hibited. Furthermore, provocation of a bribe or of a commercial bribe is in question 28 is that the Criminal Code punishes only individuals whereas criminalised as well by article 304 of the Criminal Code. ‘Provocation’ is article 19.28 provides for the liability of legal entities. The Administrative defined as an attempt to give a bribe without the consent of the person who Offences Code stipulates no sanctions for companies for bribery in sport, is supposed to receive the bribe, where such attempt has the ultimate aim and bribery of witnesses, interpreters, victims and experts in court and of manufacturing evidence of criminal taking of the bribe or of blackmail- other official proceedings. ing the person receiving a bribe.
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24 Public officials corporations, state funds and other entities created to perform the func- How does your law define a public official and does that tions of federal state agencies can be treated as state servants for present purposes. definition include employees of state-owned or state- For state public officials, such as judges, members of parliament, fed- controlled companies? eral ministers, the President of the Russian Federation and so on (these Different provisions of the Russian law target different categories of public are called collectively ‘individuals holding state offices of the Russian officials and state servants. Federation and of the constituencies of the Russian Federation’), appro- For the purposes of criminal law, a public official is the person who priate restrictions are directly provided for by special laws and by the discharges the functions of a public authority representative on a perma- Federal Law on Counteraction against Corruption. In general, apart from nent or temporary basis or by special authority (delegation), or performs performing their public function, such state officials are very limited in the organisational, regulatory, administrative and economic functions in state paid activities that they may perform. Normally such permitted activities bodies, local self-governing bodies’ state and municipal institutions, state include teaching, scientific activity and creative activity (eg, painting). corporations and also in the armed forces of the Russian Federation, in Similar restrictions have been introduced for officers and employees of the other troops and military formations of the Russian Federation (note 1 Federal Security Service of the Russian Federation and of the Central Bank to article 285 of the Criminal Code). State and municipal institutions and of the Russian Federation. state-controlled corporations are separate legal entities entirely controlled As mentioned in question 23, in accordance with the Federal Law on by the state. As indicated in the definition their employees performing the monitoring of correspondence between the expenses of the holders of pub- mentioned functions in these legal entities are to be treated as public offi- lic officers and other persons, and their income (dated 3 December 2012 No. cials for the purposes of the Criminal Code. 230-FZ) most public officials, including some senior officials of state- com Note 1 to article 19.28 of the Administrative Offences Code defines panies that perform functions of state agencies, are obliged to report on public official by reference to the described provisions of the Criminal any acquisition of real estate, vehicles or securities where the consideration Code. that they pay exceeds their aggregate income with their respective spouses For the purposes of article 575 of the Civil Code (see questions 22 and for the preceding three years. The information about the sources of funds 26) the list of public officials is provided separately and includes employ- for such transaction should be made public. Most public officials should ees of legal entities operating in the fields of health care, education, social also provide information about their income and property in respect of services and other similar entities. themselves, their spouses and minor children, which information should The Federal Law on Counteraction against Corruption now imposes also be made public (article 8 of the Federal Law on Counteraction against compliance obligations upon the officers of state corporations, state funds Corruption). The courts have already shown willingness to intervene if the and other entities created to perform the functions of federal state agen- information is not published, despite the legal requirements. cies, as well as institutions owned by municipalities. Those officers shall avoid conflict of interest and report any attempted corruption. For the pur- 26 Travel and entertainment poses of anti-corruption regulations they are treated as civil servants. Describe any restrictions on providing domestic officials The Law on Counteraction against Corruption and the Federal Law ‘On with gifts, travel expenses, meals or entertainment. Do the monitoring of correspondence between the expenses of the holders of restrictions apply to both the providing and receiving of such public officers and other persons, and their income’ dated 3 December benefits? 2012 No. 230-FZ require certain public officials and state servants to report on their income and expenses. The purpose of this legislation is, of course, See question 27. to ensure that appropriate inquiries are made where a state official or a state servant spends more money than he earns. These requirements only 27 Gifts and gratuities extend to the public officials specifically listed for that purposes in the Are certain types of gifts and gratuities permissible under your legislation (see, for example, Decree of the President dated 18 May 2009 domestic bribery laws and, if so, what types? No. 557). Please see the restrictions provided by the Federal Law on the State Civil 25 Public official participation in commercial activities Service of the Russian Federation and the Civil Code indicated in ques- Can a public official participate in commercial activities while tion 22. It should be noted that only those gifts that are received in con- serving as a public official? nection with the performance of an official’s public functions are affected. Unfortunately, the relevant provisions are scattered across various acts and Commercial activity is directly forbidden to civil servants (article 17 para- regulations with varying and imperfect formulations. However, it may be graph 1(3) of the Federal Law on the State Civil Service of the Russian argued that in practice the rules are the same for all public officials and all Federation). Apart from this, as a general rule any public official who is in kinds of state service, and that discrepancies between the formulations of a civil service has a right to be engaged in other paid activity (article 14 various regulations should be ignored for practical purposes. The intended paragraph 2 of the Federal Law on the State Civil Service of the Russian regime appears to be that the no gifts be received in private in connection Federation). This rule is subject to several conditions: such activity should with the performance of an official’s public functions and that those gifts not create a conflict of interest, it can be started only with the preliminary received officially be surrendered by the recipient within three days to the consent of the employer in a state organisation, and such activity should state body where he or she works. If the gift does not exceed 3,000 roubles not be in violation of general restrictions on a civil servant’s activity (arti- in value, it is returned to the recipient. Otherwise is can be purchased back cles 16 to 18 of the Federal Law on the State Civil Service of the Russian within two months. Federation and other special laws, see question 22) or in violation of any All that has been said above about gifts applies equally to any other specific prohibition on being engaged in other paid activity that relates to advantages, apart from the 3,000-rouble allowance, which applies only his or her position or a type of service. Ownership of shares domestically to those transactions that can be classified as gifts in accordance with the is, as a general rule, not restricted for public officials in the civil service but Civil Code. should be reported and is subject to some specific rules, such as a duty to submit securities to trust management in case of a conflict of interest 28 Private commercial bribery (article 17 paragraph 1(4) and paragraph 2 of the Federal Law on the State Does your country also prohibit private commercial bribery? Civil Service of the Russian Federation). Ownership of shares abroad is prohibited for most senior state and municipal officials. Commercial bribery is also prohibited in the Russian Federation. Article The restrictions applicable to civil servants have been extended to 204 of the Criminal Code criminalises both giving and receiving commer- most of the other state officers in Russia. Those are, in particular: officers of cial bribes (see question 3). An official in the private sector is defined in the prosecution office of the Russian Federation, of the Ministry of Internal the note to article 201 of the Criminal Code as any person performing the Affairs of the Russian Federation, of the Federal Customs Service, of the functions of CEO, member of the board of directors or any other execu- Drugs Control Service, execution officers (bailiffs), military personnel tive board or a person performing on a permanent or temporary basis or (subject to any exceptions introduced by the president’s or government’s by special authority organising, regulatory, administrative and economic acts) and police officers. As mentioned in question 24, officers of state functions in any organisation.
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31 Recent decisions and investigations Update and trends Identify and summarise recent landmark decisions and Russian anti-corruption legislation has undergone substantial investigations involving domestic bribery laws, including any development in recent years. While further improvement is investigations or decisions involving foreign companies. possible (in particular, by introducing criminal liability for legal entities that would allow more efficient international cooperation See question 13. in complex corruption cases), the laws already in force provide a Although a number of high-profile corruption cases are still at the fairly comprehensive framework of regulatory provisions supported investigation stage, there have been some important sentencing issues for by criminal and civil liability that can be used efficiently to combat corruption. In particular, according to media reports, two Ekaterinburg corruption. These laws are still to be fully tested in application, police officers, Sergey Rakhmanov and Vladimir Plaksin, were sentenced but we have already seen a number of convictions and high-profile to nine and eight years respectively of deprivation of liberty (and other investigations that show the willingness of the law enforcement penalties, including large fines) for fraud and corruption, and a municipal authorities to achieve practical results. official in the city of Omsk, Valery Usatov was sentenced to two years of deprivation of liberty and some ancillary penalties. Some well-reported investigations were continued in 2013. For exam- Liability for legal entities is provided for in the Administrative Offences ple, charges of fraud were brought against several individuals in connec- Code (see question 22). tion with an alleged misappropriation of funds through a state agricultural leasing entity, OJSC Rosagroleasing. Investigations are apparently still 29 Penalties and enforcement pending in the scandalous cases that erupted in 2012, such as the US$215 What are the sanctions for individuals and companies violating million alleged embezzlement in connection with the GLONASS naviga- the domestic bribery rules? tion project, the alleged embezzlement in the course of preparation for the APEC 2012 summit (the Audit Chamber recently reported around 15 On sanctions, liability and enforcement of penalties for acts of bribery billion-rouble losses from the funds allocated to this project, but it said in Russian law, see questions 22, 24, 26 and 28. Bribe giving and taking is that no criminal conduct is alleged, apart from what is already under crimi- mostly punished by fines and deprivation of liberty. Since 2011 the fines are nal investigation) and sales of various lots of real estate by the Ministry of linked to the amounts of bribes given or received. In the most serious cases Defence, which, owing to alleged underpricing, caused substantial losses to of bribe taking a fine can be as high as 100 times the amount of the bribe. the state. In the latter case, however, several sentences were issued in 2013. For public officials that are in the civil state service or municipal ser- According to the statistics recently made public by the head of the vice, acts of bribery or other violations of anti-corruption provisions (such Investigations Committee, 14,000 cases of economic crimes against the as failure to provide full reports of funds and assets, failure to address con- state were brought to court on the basis of the committee’s investigations, flicts of interest) can cause disciplinary liability on the basis of the Federal and more then 25 billion roubles were reimbursed to the state budget. Law on the State Civil Service of the Russian Federation (articles 19, 20, 37 During the first six months of 2014 the committee investigated 3,337 and 57) or the Federal Law on Municipal Service in the Russian Federation instances of bribe taking and 3,414 instances of giving bribes. In the same (dated 2 March 2007 No. 25-FZ) (articles 14.1, 15, 27, 27.1). Moreover, even period, 723 persons were sentenced for bribe taking and it appears that the failure to inform an employer of any offer of a bribe constitutes a dis- the majority of them received conditional sentences or fines. Some 2,252 ciplinary offence for all the state and municipal servants (article 9 of the persons were convicted for giving bribes, but only 262 of those convicted Federal Law on Counteraction against Corruption). were sentenced to unconditional deprivation of freedom (148 of them for The forms of disciplinary liability for state civil officers are as follows: one year or less); however, 1,817 fines were imposed. Confiscation was admonition; reprimand, warning about partial ineptitude, dismissal from applied only in 15 cases of bribe taking and in 144 cases of bribe giving. office and release from the office. Disciplinary liability for municipal officers can ensue in fewer forms: admonition, reprimand and release from service. Most violations of anti-corruption law would result in dismissal from office.
30 Facilitating payments Have the domestic bribery laws been enforced with respect to facilitating or ‘grease’ payments? See questions 5, 7 and 22; no special facilitating payments are allowed, and bribery laws are applicable to them.
Vasily Torkanovskiy [email protected]
Floor 3 Tel: +7 495 647 0046 10/4 Bolshaya Dmitrovka Street Fax: +7 495 647 0045 107031 Moscow [email protected] Russia www.ivanyanandpartners.com
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Saudi Arabia
Robert Thoms and Sultan Al-Hejailan The Law Firm of Salah Al-Hejailan in association with Freshfields Bruckhaus Deringer
1 International anti-corruption conventions 7 Payments through intermediaries or third parties To which international anti-corruption conventions is your In what circumstances do the laws prohibit payments through country a signatory? intermediaries or third parties to foreign public officials? The United Nations Convention against Corruption. The CBL contemplates violations committed by or through intermediaries and accessories. 2 Foreign and domestic bribery laws Identify and describe your national laws and regulations 8 Individual and corporate liability prohibiting bribery of foreign public officials (foreign bribery Can both individuals and companies be held liable for bribery laws) and domestic public officials (domestic bribery laws). of a foreign official? • Combating Bribery Law (CBL), Royal Decree No. M/36, dated Yes. 29/12/1412AH (corresponding to 30 June 1992); • Civil Service Law, Royal Decree No. M/49, dated 10/7/1397AH (cor- 9 Civil and criminal enforcement responding to 26 June 1977); Is there civil and criminal enforcement of your country’s • National Anti-Corruption Commission Law, Council of Ministers foreign bribery laws? Resolution No. 165 dated 28/5/1432AH (corresponding to 2 May 2011) and Implementing Rules; and The CBL is a criminal statute, although a private action concerning foreign • National Strategy for Protecting Honesty and Combating Corruption, bribery would be entertained. Council of Ministers Resolution No. 43, dated 1/2/1428AH (corre- sponding to 19 February 2007). 10 Agency enforcement What government agencies enforce the foreign bribery laws Foreign bribery and regulations? 3 Legal framework The Council of Ministers, the Ministry of Interior, the Board of Grievances Describe the elements of the law prohibiting bribery of a (administrative chamber) and the General Bureau of Supervision are the foreign public official. government agencies that enforce the foreign bribery laws and regulations.
The same elements as domestic bribery apply as set out in question 22. 11 Leniency
4 Definition of a foreign public official Is there a mechanism for companies to disclose violations in exchange for lesser penalties? How does your law define a foreign public official? The briber or intermediary shall be exonerated if he or she reports the The CBL makes no distinction between a foreign or domestic public offi- offence to the Saudi authorities prior to detection. cial, and Saudi Arabia takes the position that its legal system criminalises the bribery of foreign public officials by Saudi nationals. See the definition 12 Dispute resolution of ‘public official’ in question 22. Can enforcement matters be resolved through plea 5 Travel and entertainment restrictions agreements, settlement agreements, prosecutorial discretion To what extent do your anti-bribery laws restrict providing or similar means without a trial? foreign officials with gifts, travel expenses, meals or Yes. A trial is more of a formality in such cases. entertainment? 13 Patterns in enforcement The prohibition on a public official’s receiving a ‘gift’ in the context of brib- ery includes gifts, travel expenses, meals or entertainment of any value, if Describe any recent shifts in the patterns of enforcement of the the requisite elements of bribery are met. There is no special treatment of foreign bribery rules. travel and entertainment in the CBL; in practice, modest levels are accept- The recent National Anti-Corruption Commission Law evidences an able if there is no specific intent to bribe. enhanced commitment of the Saudi government to combat corruption. See ‘Update and trends’. 6 Facilitating payments Do the laws and regulations permit facilitating or ‘grease’ 14 Prosecution of foreign companies payments? In what circumstances can foreign companies be prosecuted This is not specifically addressed, except as regards prohibition of a pub- for foreign bribery? lic official’s following up a formality with a government authority as an Saudi Arabian courts generally do not accept jurisdiction over a foreign instance of bribery. company if the elements of the bribery take place entirely outside Saudi
184 Getting the Deal Through – Anti-Corruption Regulation 2015 The Law Firm of Salah Al-Hejailan in association with Freshfields Bruckhaus Deringer SAUDI ARABIA
Arabia. Foreign companies doing business in Saudi Arabia, with or with- • the act includes exercising real or alleged influence in order to obtain out legal presence, are subject to Saudi law with respect to their acts within or attempt to obtain from any public authority any act, matter, deci- Saudi Arabia. sion, obligation, contract, licence, supply agreement, job, service or any other benefit or advantage. 15 Sanctions What are the sanctions for individuals and companies violating The penalties are: • maximum penalty of 10 years’ imprisonment and a 1 million Saudi the foreign bribery rules? riyal fine; The penalties are the same as for domestic bribery as set forth in question • abstaining from acting (a lesser offence – maximum three years’ 22. imprisonment and 300,000 riyal fine); • following up a formality (a lesser offence – maximum penalty of two 16 Recent decisions and investigations years’ imprisonment and 50,000 riyal fine); • the same penalties attach to public officials, bribers, intermediaries Identify and summarise recent landmark decisions or and accessories, including any person who offers a bribe that is not investigations involving foreign bribery. accepted (in the latter case, a maximum penalty of 10 years’ imprison- Saudi Arabian jurisprudence does not include the doctrine of legal prec- ment and a 1 million riyal fine); and edent, and judicial or administrative decisions are not systematically • a person who is appointed by the briber or bribed to receive the bribe, reported. and knowingly agrees to act, is subject to a maximum penalty of two years’ imprisonment and 50,000 riyal fine. Financial record keeping A ‘public official’ is defined as: 17 Laws and regulations • a person employed by the government or any public administrative What legal rules require accurate corporate books and records, authority, regardless of whether permanent or temporary; effective internal company controls, periodic financial • an arbitrator or expert appointed by the government or any judicial statements or external auditing? body; • a person assigned by a government authority to perform a specific The Commercial Books Law, the Companies Law, the Income Tax Law, assignment; the Anti-Money Laundering Law and the Capital Market Law are relevant. • a person employed by a company that manages or operates a public facility or performs a public service, or employed by a joint-stock 18 Disclosure of violations or irregularities company or company in which the government has a holding, as well To what extent must companies disclose violations of anti- as a company carrying out banking operations; or bribery laws or associated accounting irregularities? • a chairman or director of a company provided for in the preceding paragraph. Disclosure before detection can lead to exoneration of the briber or inter- mediary. The Capital Market Law requires disclosure in a prospectus (and A conviction shall result in dismissal of the public official and future ban- as a continuing obligation) of material matters and facts, including as ning from any public office, or office tantamount to same, and confiscation regards litigation and claims, and director convictions involving fraud, dis- of the property constituting the bribe. honesty or money-laundering. A person who reoffends within five years of the imposition of a penalty may on a subsequent offence receive double the above penalties. 19 Prosecution under financial record keeping legislation A corporate offender whose manager or any staff member has been Are such laws used to prosecute domestic or foreign bribery? found guilty serving the company interest is subject to a fine not exceeding tenfold the value of the bribe, as well as banning from government con- Not generally. tracts (subject to reconsideration after at least five years by the Council of Ministers). 20 Sanctions for accounting violations Government authorities for which such a banned company is cur- What are the sanctions for violations of the accounting rules rently executing work shall recommend to the Council of Ministers action associated with the payment of bribes? deemed fit with regard to such work.
These are not separate from the penalty for the bribery itself. 23 Prohibitions Does the law prohibit both the paying and receiving of a bribe? 21 Tax-deductibility of domestic or foreign bribes Do your country’s tax laws prohibit the deductibility of Yes. domestic or foreign bribes? 24 Public officials Not expressly, but it is well understood that a bribe is not a legitimate tax How does your law define a public official and does that deduction. definition include employees of state-owned or state- Domestic bribery controlled companies? 22 Legal framework The definition of public official is set forth above in question 22 and includes the chairman, directors and employees of state-owned companies, as well Describe the individual elements of the law prohibiting bribery as state-controlled companies in the sense of companies managing or of a domestic public official. operating a public facility or performing a public service. The CBL states the following: 25 Public official participation in commercial activities • a public official is prohibited from accepting, receiving or soliciting a bribe, for himself or a third party, to perform any duty of his function Can a public official participate in commercial activities while (or claimed to fall within his function), even where the act is lawful; serving as a public official? • a bribe is any benefit or privilege, promise or gift, be it material or not; • the prohibition applies regardless of the intention of the public official A public official within the Civil Service may not: engage directly or indi- not to perform the act; rectly in trading, brokerage, commercial agency, contracting or other • the offence includes a public official’s violating his duties or being business; take part in the formation of companies; accept a chairman- remunerated for his actions; ship or other post in a company, except when appointed or seconded by • the act does not require prior agreement; and the government; but may engage part-time in work in the private sector outside official work hours, pursuant to resolutions enacted by the Council www.gettingthedealthrough.com 185 SAUDI ARABIA The Law Firm of Salah Al-Hejailan in association with Freshfields Bruckhaus Deringer of Ministers or by-laws such as those of the universities, subject to the approval of the department in which the public official is working. Update and trends
26 Travel and entertainment The seriousness with which top Saudi authorities are treating anti‑corruption efforts is evidenced, for example, by reports of the Describe any restrictions on providing domestic officials formation of an investigation committee within the judiciary under with gifts, travel expenses, meals or entertainment. Do the the direction of the Royal Diwan to consider alleged violations by a restrictions apply to both the providing and receiving of such number of judges in the handling of a high-profile dispute among shareholders of a prominent Saudi company. benefits? Moreover, in contrast to the revolutionary activity in other Arab The prohibition on a public official receiving a ‘gift’ in the context of brib- countries arising from the Arab Spring, the role of social media, especially Twitter, in Saudi Arabia, including to a great extent in the ery includes gifts, travel expenses, meals or entertainment of any value, context of the growing discontent in recent years about flooding if the requisite elements of bribery are met. There is no special treatment in Jeddah and Riyadh, amid allegations of corruption, has been of travel and entertainment in the CBL; in practice, modest levels are not evidence of a growing evolutionary reform movement in Saudi objectionable if there is no specific intent to bribe. There would be equal Arabia focusing in part on anti-corruption. treatment for providing and receiving such benefits.
27 Gifts and gratuities Are certain types of gifts and gratuities permissible under your 30 Facilitating payments domestic bribery laws and, if so, what types? Have the domestic bribery laws been enforced with respect to facilitating or ‘grease’ payments? Certain types of gifts and gratuities are permissible of nominal value – if there is no intent to bribe. Nonetheless, the Civil Service Law does pro- Generally not enforced, although the CBL proscribes, as an instance of hibit a public official from accepting any gift, which is in keeping with the bribery, following up a formality with a government authority. In theory, a Islamic teaching (hadith – second source of Islamic law) on the subject. bribe is still a bribe whether it is of material value or not.
28 Private commercial bribery 31 Recent decisions and investigations Does your country also prohibit private commercial bribery? Identify and summarise recent landmark decisions and This is not covered by the CBL; it would be considered a private action for investigations involving domestic bribery laws, including any contractual breach or actionable instance of unfair competition or unjust investigations or decisions involving foreign companies. enrichment. Please note that the definition of ‘public official’ in question 22 Saudi Arabian jurisprudence does not include the doctrine of legal prec- includes certain persons otherwise considered to be in the private sector. edent, and judicial or administrative decisions are not systematically reported. 29 Penalties and enforcement What are the sanctions for individuals and companies violating the domestic bribery rules? See question 22.
Robert Thoms [email protected] Sultan Al-Hejailan [email protected]
Al-Dahna Center, 54 Al-Ahsaa Street Tel: +966 11 479 2200 Malaz District Fax: +966 11 479 1717 PO Box 1454 www.hejailanlaw.com Riyadh 11431 Saudi Arabia
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Singapore
Wilson Ang and Kayla Feld Norton Rose Fulbright (Asia) LLP
1 International anti-corruption conventions Foreign bribery To which international anti-corruption conventions is your 3 Legal framework country a signatory? Describe the elements of the law prohibiting bribery of a Singapore became a signatory to the United Nations Convention against foreign public official. Corruption (UNCAC) on 11 November 2005 (ratification on 6 November As mentioned in question 2, there are no provisions in the PCA or the 2009) and to the United Nations Convention against Transnational Penal Code which specifically prohibit bribery of a foreign public official. Organized Crime on 13 December 2000 (ratification on 28 August 2007). However, the general prohibition against bribery in the PCA, in particular Singapore has been a member of the Financial Action Task Force on corrupt transactions with agents, read together with section 37 of the since 1992, was one of the founding members of the Asia-Pacific Group on PCA, prohibits, in effect, the bribery of a foreign public official outside Money-Laundering in 1997, and was admitted as a member of the Egmont Singapore by a Singapore citizen. Section 37 of the PCA gives the anti- Group of Financial Intelligence Units in 2002. Singapore is also a mem- corruption legislation extraterritorial effect because if the act of bribery ber of the ADB/OECD Anti-Corruption Initiative for Asia and the Pacific, takes place outside Singapore and the bribe is carried out by a Singapore which it endorsed on 30 December 2001. citizen, section 37 of the PCA states that the offender would be dealt with as if the bribe had taken place in Singapore. 2 Foreign and domestic bribery laws Under section 5 of the PCA, it is an offence for a person (whether by Identify and describe your national laws and regulations himself or in conjunction with any other person) to: prohibiting bribery of foreign public officials (foreign bribery • corruptly solicit, receive, or agree to receive for himself or for any laws) and domestic public officials (domestic bribery laws). other person; or • corruptly give, promise, or offer to any person, whether for the benefit The primary Singapore statutes prohibiting bribery are the Prevention of of that person or of another person any gratification as an inducement Corruption Act (PCA) (Cap 241, 1993 Rev Ed) and the Penal Code (Cap 224, to or reward for or otherwise on account of: 2008 Rev Ed). • any person doing or forbearing to do anything in respect of Sections 5 and 6 of the PCA prohibit bribery in general. Section 5 any matter or transaction whatsoever, actual or proposed; or makes active and passive bribery by individuals and companies in the pub- • any member, officer or servant of a public body doing or for- lic and private sectors an offence. Section 6 makes it an offence when an bearing to do anything in respect of any matter or transaction agent is corruptly offered or corruptly accepts gratification in relation to the whatsoever, actual or proposed, in which such public body is performance of the principal’s affairs or for the purpose of misleading the concerned. principal. The term ‘gratification’ is interpreted broadly (see question 5). Sections 11 and 12 of the PCA prohibit bribery of domestic public It is also an offence under section 6 of the PCA for: officials. An official is defined as a ‘member, officer or servant of a public • an agent to corruptly accept or obtain any gratification as an induce- body’. A ‘public body’ is defined as ‘any corporation, board, council, com- ment or reward for doing or forbearing to do any act in relation to his missioners or other body which has power to act under and for the pur- principal’s affairs; poses of any written law relating to public health or to undertakings or public utility or otherwise to administer money levied or raised by rates or • a person to corruptly give or offer any gratification to an agent as an charges in pursuance of any written law’. The Singapore Interpretation Act inducement or reward for doing or forbearing to do any act in relation defines the term ‘public officer’ as ‘the holder of any office of emolument in to his principal’s affairs; or the service of the [Singapore] Government’. The PCA does not specifically • a person to knowingly give to an agent a false or erroneous or defective target bribery of foreign public officials, but such bribery could fall under statement, or an agent to knowingly use such statement, to deceive his the ambit of the general prohibitions, namely section 6 on corrupt transac- principal. tions with agents. The Penal Code also contains provisions that relate to the bribery of Section 4 of the Penal Code also creates extraterritorial obligations for all public officials (sections 161 to 165). Public officials are referred to in the Singapore public servants and states that any act or omission committed Penal Code as ‘public servants’, which have been defined in the Penal Code by a public servant outside of Singapore in the course of his or her employ- to include mainly domestic public officials. Sections 161 to 165 describe the ment that would constitute an offence in Singapore will be deemed to have following scenarios as constituting bribery: been committed in Singapore. Accordingly, if the public servant accepted a • a public servant taking a gratification, other than legal remuneration, bribe overseas, he or she would be liable under Singapore law. in respect of an official act; The extraterritorial effects of the PCA and Penal Code are limited in • a person taking a gratification in order to influence a public servant by the respect that they only apply to Singapore citizens and Singapore public corrupt or illegal means; servants respectively. In Public Prosecutor v Taw Cheng Kong [1998] 2 SLR • a person taking a gratification for exercising personal influence over a 410, a case involving a constitutional challenge to the extraterritoriality of public servant; section 37 of the PCA, the court upheld the provision and concluded that • abetment by a public servant of the above offences; and it was ‘rational to draw the line at citizenship and leave out non-citizens so • a public servant obtaining anything of value, without consideration or as to observe international comity and the sovereignty of other nations’. with consideration the public servant knows to be inadequate, from a The court further observed that the language of the provision was wide person concerned in any proceedings or business conducted by such and ‘capable of capturing all corrupt acts by Singapore citizens outside public servant. Singapore, irrespective of whether such corrupt acts have consequences www.gettingthedealthrough.com 187 SINGAPORE Norton Rose Fulbright (Asia) LLP within the borders of Singapore or not’. As regards non-citizens commit- 8 Individual and corporate liability ting corruption outside Singapore that could cause harm in Singapore, the Can both individuals and companies be held liable for bribery court opined that section 29 of the PCA, which deals with the abetment of a of a foreign official? corrupt act abroad, could be wide enough to address that scenario. The Corruption, Drug Trafficking and Other Serious Crimes Both individuals and companies can be held liable for bribery offences, (Confiscation of Benefits) Act (CDSA), which deals with the prevention of including bribery of a foreign official. The various provisions in the PCA and laundering of the proceeds of corruption and other crimes, also has extrater- Penal Code set out certain offences that may be committed by a ‘person’ if ritorial application. Section 47 of the CDSA provides that any person who such person were to engage in certain corrupt behaviour. The term ‘per- knows or has reasonable ground to believe that any property represents son’ has been defined in the Singapore Interpretation Act to include ‘any another person’s benefits from criminal conduct is guilty of an offence if he company or association of body of persons, corporate or unincorporated’. conceals, disguises, converts, transfers or removes that property from the In addition, Singapore case law indicates that corporate liability can be jurisdiction for the purposes of assisting any person to avoid prosecution. imposed on companies for crimes committed by their employees, agents, etc (see Tom Reck Security Services Pte Ltd v PP [2001] 2 SLR 70). A test for 4 Definition of a foreign public official establishing corporate liability is whether the individual who committed How does your law define a foreign public official? the crime can be regarded as the ‘embodiment of the company’, or whose acts ‘are within the scope of the function of management properly dele- As the PCA and the Penal Code do not specifically deal with the bribery of gated to him’. This test, known as the identification doctrine, was derived a ‘foreign public official’, the statutes do not define this term. from English case law (see Tesco Supermarkets Ltd v Natrass [1971] 2 All ER 127). The identification doctrine was subsequently broadened in the Privy 5 Travel and entertainment restrictions Council case of Meridian Global Funds Management Asia Ltd v Securities To what extent do your anti-bribery laws restrict providing Commission [1995] 2 AC 500, which held that the test for attributing men- foreign officials with gifts, travel expenses, meals or tal intent should depend on the purpose of the provision creating the rel- evant offence. This broader approach has been affirmed in Singapore (see entertainment? The Dolphina [2012] 1 SLR 992) in a case involving shipping and conspiracy There are no express restrictions in the PCA or Penal Code on provid- but not in the context of bribery offences. However, the test for corporate ing foreign officials with gifts, travel expenses, meals or entertainment. liability is different in relation to money laundering offences. Section 52 of However, any gift, travel expense, meal or entertainment provided with the CDSA introduces a lower threshold of proof for corporate liability. It the requisite corrupt intent will fall foul of the general prohibition under provides that where it is necessary to establish the state of mind of a body the PCA, and would constitute an offence. corporate in respect of conduct engaged by the body corporate it shall be As noted in question 3, the PCA prohibits (among other things), the sufficient to show that a director, employee or agent of the body corporate offer or provision of any ‘gratification’ if accompanied with the requisite acting within the scope of his or her actual or apparent authority, had that corrupt intent. The term ‘gratification’ is broadly defined under the PCA to state of mind. Likewise, any conduct engaged in or on behalf of a body cor- include money, gifts, loans, fees, rewards, commissions, valuable security, porate by a director, employee or agent of the body corporate acting within property, interest in property, employment contract or services or any part the scope of his or her actual or apparent authority, or by any other per- or full payment, release from or discharge of any obligation or other liabil- son at the direction or with the consent or agreement of the above, shall ity; and any other service, favour or advantage of any description whatso- be deemed, for the purposes of the CDSA, to have been engaged in by the ever (see Public Prosecutor v Teo Chu Ha [2014] SGCA 45). body corporate. Under the Penal Code, the term ‘gratification’ is used but not expressly Generally, individual directors and officers of a company will not be defined. The explanatory notes to the relevant section stipulate that the held strictly liable for offences found to have been committed by the com- term is not restricted to pecuniary gratifications or those with monetary pany if they were not personally responsible for, or otherwise involved value. The Singapore courts have also held that questionable payments in, that particular offence. However, section 59 of the CDSA provides made pursuant to industry norms or business customs will not constitute that where an offence under the CDSA committed by a body corporate a defence to any prosecution brought under the PCA (see Public Prosecutor is proved to have been committed with the consent or connivance of an v Soh Cham Hong [2012] SGDC 42) and any evidence pertaining to such officer or to be attributable to any neglect on his or her part, the officer as customs will be inadmissible in any criminal or civil proceedings under well as the body corporate shall be guilty of the offence. It is also possi- section 23 of the PCA (see Chan Wing Seng v Public Prosecutor [1997] ble that an individual such as a director or officer of a company, although 1 SLR(R) 721). not personally guilty of committing a corrupt act, may be held liable for consequential offences including money-laundering or failure to report a 6 Facilitating payments suspicion that certain property or the transfer of assets was connected to criminal conduct. Do the laws and regulations permit facilitating or ‘grease’ payments? 9 Civil and criminal enforcement Neither the PCA nor the Penal Code expressly permits facilitating or Is there civil and criminal enforcement of your country’s ‘grease’ payments. Such payments would technically constitute an act foreign bribery laws? of bribery under the general prohibitions of both the PCA and the Penal Code. Notably, section 12(a)(ii) of the PCA prohibits the offer of any grati- Yes, criminal enforcement against corrupt activities is provided for in both fication to any member of a public body as an inducement or reward for the PCA and the Penal Code. In particular, if the court rules that there has the member’s ‘expediting’ of any official act, among other prohibited acts. been a violation of the general prohibitions on bribery in the PCA, a pen- alty of a fine, imprisonment, or both will be imposed on the offender. The 7 Payments through intermediaries or third parties offender may also have to pay the quantum of the bribe received. In regards to civil enforcement, a victim of corruption will be able to In what circumstances do the laws prohibit payments through bring a civil action to recover the property of which it has been deprived. intermediaries or third parties to foreign public officials? Section 14 of the PCA expressly provides that, where gratification has been Corrupt payments through intermediaries or third parties, whether such given to an agent, the principal may recover, as a civil debt, the amount payments are made to foreign public officials or to other persons, are pro- or the money value thereof either from the agent or the person paying the hibited. Section 5 of the PCA expressly provides that a person can commit bribe. This provision is without prejudice to any other right and remedy the offence of bribery either ‘by himself or by or in conjunction with any that the principal may have to recover from his agent any money or prop- other person’. erty. The objective of imposing this additional penalty is to disgorge the offender’s proceeds from the corrupt transaction. The case Ho Kang Peng v Scintronix Corp Ltd (formerly known as TTL Holdings Ltd) [2014] SGCA 22 provides an example of a company success- fully bringing a civil claim against its former CEO and director, Ho Kang Peng, for engaging in corrupt activities. The Court of Appeal dismissed
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Ho’s appeal from the High Court, holding that he had breached his fiduci- reviewed the evidence in the prosecution’s case, choose to plead guilty and ary duties owed to the company by making and concealing unauthorised enter a plea mitigation to avoid a public trial. payments in the name of the company. The Court of Appeal found that In October 2010 there was a court ruling involving the CEO of AEM- although the payments were for the purpose of securing business for the Evertech, a Singapore-listed company, who exposed corrupt practices by company, Ho could not be said to be acting in the bona fide interests of the the company’s top management, including himself (see Public Prosecutor company because the payments were, in effect, gratuities and thereby ran v Ang Seng Thor [2010] SGDC 454 – the AEM-Evertech case). In sentencing the unjustified risk of subjecting the company to possible criminal liability. the CEO, the district judge took into consideration the fact that his whistle- blowing helped to secure the conviction of other members of the com- 10 Agency enforcement pany’s management and consequently did not impose a prison sentence. What government agencies enforce the foreign bribery laws However, in May 2011, the prosecution successfully appealed against this decision. It was held by the Court of Appeal that the judge in the first and regulations? instance, had, on the facts, incorrectly found that the CEO’s role in the mat- The main government agency that enforces bribery laws in Singapore is the ter demonstrated a low level of culpability (see Public Prosecutor v Ang Seng Corrupt Practices Investigation Bureau (CPIB). The CPIB derives its pow- Thor [2011] 4 SLR 217). It also found that the CEO was not an archetypal ers from the PCA and is responsible for investigating and preventing cor- whistle-blower, owing to the fact that he only admitted personal wrong- ruption in Singapore, focusing on corruption-related offences arising under doing when placed under investigation by the CPIB in May 2007 and had the PCA and the Penal Code. failed to approach the authorities directly with evidence of unauthorised Under the PCA, the CPIB has extensive powers of investigation, activities. The sentence imposed at first instance was therefore set aside which include powers to require the attendance of witnesses for inter- and substituted with a sentence of six weeks’ imprisonment and a fine of view, to investigate a suspect’s financial and other records and the power S$25,000 on each of the two charges, with each prison sentence to run con- to investigate any other seizable offence disclosed in the course of a cor- secutively. Although the Court of Appeal overruled the first instance deci- ruption investigation. Special investigative powers can be granted by the sion, the case confirms that a genuine whistle-blower would potentially be public prosecutor, such as the power to investigate any bank account, share treated with a degree of leniency during sentencing. The exercise of judi- account, purchase account, expense account or any other form of account cial discretion will depend, in part, on the motivation of the whistle-blower or safe deposit box and to require the disclosure of all information, docu- and the degree of cooperation during the investigation. ments or articles required by the officers. The CPIB carries out investigations into complaints of corruption but 12 Dispute resolution does not prosecute cases itself. It refers the cases, where appropriate, to Can enforcement matters be resolved through plea the public prosecutor for prosecution. The PCA provides that no prosecu- agreements, settlement agreements, prosecutorial discretion tion under the PCA shall be instituted except by or with the consent of the or similar means without a trial? public prosecutor. The Commercial Affairs Department (CAD) is the principal white- The public prosecutor has discretion to initiate, conduct or discontinue any collar crime investigation agency in Singapore that investigates complex criminal proceedings. It may be possible for a person under investigation to fraud, white-collar crime, money-laundering and terrorism financing. The convince the public prosecutor not to initiate criminal proceedings against CAD’s Financial Investigation Division is specially empowered to combat him or, as described in question 11 above, if criminal proceedings have money-laundering, terrorism financing and fraud involving employees of already been initiated, an accused person may submit letters of represen- financial institutions in Singapore and works closely with financial institu- tation (on a ‘without prejudice’ basis) to the public prosecutor to negotiate tions, government agencies and its foreign counterparts. the possible withdrawal, amendment, or reduction of charges. The public The Financial and Technology Crime Division (FTCD) was established prosecutor has sole discretion whether to accede to such letters of repre- within the Attorney-General’s Chambers (AGC) in November 2014, as part sentation. It may also be possible for an accused person to plead guilty to of a re-designation of the Economic Crimes and Governance Division certain charges, in return for which the public prosecutor will withdraw (EGD) to bring cybercrimes under the division’s purview. The EGD had or reduce certain other charges. The accused may also plead guilty to the been responsible for the enforcement, prosecution and all related appeals charges brought against him so as to resolve a particular matter without a in respect of financial crimes and corruption cases within and outside of trial, and then to enter a mitigation plea. Singapore. The reorganised division focuses on financial crimes ranging In March 2013, the AGC and the Law Society issued the Code of from securities fraud and money laundering to corruption and criminal Practice for the Conduct of Criminal Proceedings by the Prosecution and breach of trust, as well as a broad range of cybercrimes. It is one of two Defence, which is a joint code of practice that sets out the duties of pros- divisions in AGC’s crime cluster, with the Criminal Justice Division being ecutors and lawyers during criminal trials and deals with various matters the other. including plea bargaining. The Monetary Authority of Singapore (MAS) is responsible for issu- ing guidelines on money-laundering and terrorist financing to financial 13 Patterns in enforcement institutions. The MAS does not carry out investigations relating to money- Describe any recent shifts in the patterns of enforcement of the laundering and terrorist-financing activities; it will refer investigations of foreign bribery rules. such activities to the CAD. Significantly, in January 2015 the Singapore Prime Minister announced that 11 Leniency the capabilities and manpower of the CPIB will be strengthened by more Is there a mechanism for companies to disclose violations in than 20 per cent as corruption cases have become more complex, some exchange for lesser penalties? with international links. This announcement follows the establishment and reorganisation of the EGD to the FTCD (see question 10) signalled The PCA and the Penal Code do not expressly provide for a formal mecha- an intent by the AGC to actively enforce and prosecute complex bribery nism for companies to disclose violations of bribery laws in exchange for offences, including cybercrime, committed outside Singapore that may leniency. Whilst there are no formal legislative mechanisms in place, a plea involve foreign companies and foreign public officials. bargaining process with the public prosecutor is available. An accused can The Mutual Assistance in Criminal Matters Act was revised in July submit letters of representation to the public prosecutor to negotiate the 2014 to improve Singapore’s ability to provide mutual legal assistance to possible withdrawal, amendment or reduction of the charges, highlighting other countries and demonstrates a commitment to cross-border coopera- any merits of the case that may warrant the exercise of the public prosecu- tion. The amendments primarily ease requirements that foreign countries tor’s discretion to do so. The public prosecutor retains the sole discretion would need to satisfy to make requests for legal assistance and widen the to accede to the requests in the letters of representation. The Singapore scope of mutual legal assistance that Singapore can provide. courts introduced a voluntary Criminal Case Resolution programme in Public sector complaints and prosecutions remain consistently low 10 October 2011 where a district judge functions as a neutral mediator due, in part, to the aggressive enforcement stance taken by the CPIB, as between the prosecution and defence with a view to parties reaching an well as to the high wages paid to public servants that reduce the financial agreement. If the mediation is unsuccessful, the judge will not hear the benefit of taking bribes as compared to the risk of getting caught. The case. Once proceedings have been initiated, the accused may, having majority of the CPIB’s investigations relate to the private sector, which for www.gettingthedealthrough.com 189 SINGAPORE Norton Rose Fulbright (Asia) LLP
2013 made up 84 per cent of its investigations registered for action (an 8 per executives, along with several US Navy officers, were charged in October cent increase from the previous year). 2013 in US courts with conspiracy in a bribery scheme that cost the US Navy more than US$10 million. The owner of the firm and some of the other 14 Prosecution of foreign companies defendants have pleaded guilty to various charges involving bribery. The In what circumstances can foreign companies be prosecuted US government has barred Glenn Defense Marine Asia from any new contracts and terminated nine contracts worth US$205 million that it had for foreign bribery? with the US Navy. Under the general offences of the PCA, foreign companies can be pros- The crackdown against corruption in China has been gathering pace ecuted for the bribery of a foreign public official if the acts of bribery are over the past year and Project Foxhunt, which seeks to bring justice to committed in Singapore (see question 2). In addition, section 29 of the PCA economic fugitives, primarily corrupt Chinese government officials who read together with section 108A of the Penal Code allows foreign compa- have fled abroad over the past decade with their ill-gotten gains, has nies to be prosecuted for bribery that was substantively carried out over- seen an increased level of coordination between Chinese law enforce- seas, if the aiding and abetment of such bribery took place in Singapore. ment agencies and their foreign counterparts. In Singapore, Li Huabo, a Chinese national who was the finance bureau officer of Jiangxi province 15 Sanctions and who later became a Singapore permanent resident, was sentenced by the Singapore Court for receiving money belonging to the Chinese govern- What are the sanctions for individuals and companies violating ment into his Singapore bank account. As part of this broad anti-corruption the foreign bribery rules? sweep, the China-Singapore Suzhou Industrial Park Development Group The PCA provides for a fine, a custodial sentence, or both for the contra- (CSSD) found itself facing media scrutiny when its former president and vention of the general anti-corruption provisions under sections 5 and 6 the deputy party secretary of the Suzhou Industrial Park Administrative (which include the bribery of foreign public officials in Singapore, and the committee were investigated by Chinese authorities for alleged corruption bribery of foreign public officials overseas by a Singapore citizen when read violations. The CSSD was launched in 1994 as a project aiming to replicate with section 37). The guilty individual or company may be liable to a fine Singapore’s industrialisation expertise in Suzhou and other cities. Those not exceeding S$100,000 or imprisonment for a term not exceeding five investigations are ongoing. years, if appropriate. Where the offence involves a government contract or An executive of Singapore-based oil trading company Kernel Oil was bribery of a member of parliament, the maximum custodial sentence has prosecuted by Indonesia’s Corruption Eradication Commission for bribing been extended to seven years (see question 29). There are also civil rem- the former head of SKK Migas, Indonesia’s agency overseeing the explora- edies and penalties for the restitution of property pursuant to the PCA (see tion and production of crude oil and natural gas. The executive was found question 9). A person convicted of an offence of bribery under the Penal guilty in December 2013 and sentenced to three years’ imprisonment and Code may be sentenced to a fine and a custodial sentence of up to three a fine of approximately US$20,000. The former head of SKK Migas, who years. had received the bribes, was also prosecuted and found guilty of corruption There are other statutes imposing sanctions on the guilty individuals and money laundering and consequently sentenced to seven years’ impris- or companies. For example, under the CDSA, where a defendant is con- onment and fined S$21,250. victed of a ‘serious offence’ (which includes bribery), the court has the power, under section 4, to make a confiscation order against the defend- Financial record keeping ant in respect of benefits derived by him from criminal conduct. Under the 17 Laws and regulations Singapore Companies Act, a director convicted of bribery offences may be disqualified from acting as a director. What legal rules require accurate corporate books and records, effective internal company controls, periodic financial 16 Recent decisions and investigations statements or external auditing? Identify and summarise recent landmark decisions or The Singapore Companies Act is the main statute which regulates the investigations involving foreign bribery. conduct of Singapore-incorporated companies. Among other things, the Companies Act requires the keeping of proper corporate books and Several Singapore-based companies and individuals have been implicated records as will sufficiently explain the transactions and financial position in foreign bribery investigations. Following an investigation by US technol- of the company and enable true and fair profit and loss accounts and bal- ogy company Apple Inc of its former global supply manager for receiving ance sheets for a period of at least five years, the appointment of external more than S$1 million in kickbacks from Apple’s Asian suppliers (the Apple auditors, and filing of annual returns. It was amended in October 2014 case), JLJ Holdings, a Singapore-listed company, and its subsidiary Jin Li to reduce the regulatory burden on companies, provide for greater busi- Mould Manufacturing Pte Ltd (Jin Li) were implicated along with a number ness flexibility and improve corporate governance. Amendments include of other Asian companies. The former Apple supply manager had disclosed revised requirements for audit exemptions, inclusion of a requirement that confidential information about Apple’s product forecasts and pricing tar- CEOs disclose conflicts of interest, and the removal of the requirement gets to suppliers of accessories for the iPod and the iPhone in return for that private companies keep a register of members. bribes. He pleaded guilty in February 2011 in the US courts to three crimi- Singapore-listed companies are also subject to stringent disclosure, nal counts of wire fraud, conspiracy and money laundering and agreed to auditing and compliance requirements as provided by the Securities and forfeit US$2.28 million in property and money. The CPIB commenced par- Futures Act, the SGX Listing Rules, the Code of Corporate Governance allel investigations into the staff of JLJ Holdings and Jin Li in connection and other relevant rules. The SGX Listing Rules state that a company’s with the case. In September 2013, the CPIB charged two ex-directors of Jin board ‘must provide an opinion on the adequacy of internal controls’. The Li for corruptly giving and abetting the giving of a total of US$387,600 to Code of Corporate Governance provides that the board ‘must comment on the former global supply manager at Apple from November 2006 to June the adequacy and effectiveness of risk management and internal control 2009 in Singapore, Macau, China and the United States. The total value of system’. Companies that do not comply with the laws and regulations may the contracts awarded by Apple to Jin Li was estimated at US$55.8 million. be investigated by the CAD, the Accounting and Regulatory Authority of In addition, one of the two directors was charged for abetting the pay- Singapore or other regulatory bodies. ments from two other Singaporean companies to the former Apple supply manager to secure business contracts from Apple. In December 2013, one 18 Disclosure of violations or irregularities of the directors pleaded guilty and was sentenced to nine months’ jail while the case against the other director is pending. To what extent must companies disclose violations of anti- In another case involving foreign bribery, a Singapore-based business- bribery laws or associated accounting irregularities? man and owner of a multinational firm known as Glenn Defense Marine Asia was arrested in San Diego, US, while on a business trip in September The CDSA, through section 39, imposes reporting obligations on persons 2013, for allegedly bribing US naval officers to reveal confidential informa- who know or have reasonable grounds to suspect that there is property tion about the movement of US Navy ships and defrauding the US Navy which represents the proceeds of, or that was used or intended to be used through numerous contracts relating to support services for US naval ves- in connection with, criminal conduct. Criminal conduct includes acts of sels in Asia. The owner of Glenn Defense Marine Asia and one of the top bribery (which potentially extends to acts of bribery overseas). A breach of these reporting obligations attracts a fine of up to S$20,000. Section 424
190 Getting the Deal Through – Anti-Corruption Regulation 2015 Norton Rose Fulbright (Asia) LLP SINGAPORE of the Criminal Procedure Code (CPC) also imposes reporting obligations public body’. For the definition of ‘public body’, see questions 2 and 24. It on every person aware of the commission of or the intention of any other is an offence for a person to offer any gratification to a member of such a person to commit most of the corruption crimes (relating to bribery of public body as an inducement or reward for: domestic public officials) set out in the Penal Code. Section 69 of the CPC • the member’s voting or abstaining from voting at any meeting of the allows the police to conduct a formal criminal discovery exercise during public body in favour of or against any measure, resolution or question the course of corruption investigations, empowering them to search for submitted to that public body; documents and access computer records. • the member’s performing, or abstaining from performing, or aid in Apart from these express reporting and disclosure obligations under procuring, expediting, delaying, hindering or preventing the perfor- the CDSA and the CPC, the requirements imposed by the Companies Act, mance of, any official act; or Securities and Futures Act, Listing Rules and regulations issued by the • the member’s aid in procuring or preventing the passing of any vote or MAS may also impose obligations on a company to disclose corrupt activi- the granting of any contract or advantage in favour of any person. ties and associated accounting irregularities. On 2 May 2012, MAS issued a revised Code of Corporate Governance, It will, correspondingly, be an offence for a member of a public body which, in conjunction with the Listing Rules, sets out a number of obliga- to solicit or accept such gratification described above. tions that listed companies are expected to observe. The revised Code has The Penal Code also sets out a number of offences relating to domestic introduced more stringent requirements relating to the role and composi- public officials (termed ‘public servant’). The prohibited scenarios are out- tion of the Board of Directors (Principles 1 and 2), risk management and lined in question 2. The Singapore government also issues the Singapore internal controls (Principle 11) and the need to have an adequate whistle- Government Instruction Manual (Instruction Manual) to all public offi- blowing policy in place (Principle 12). The Listing Rules require listed com- cials. The Instruction Manual contains stringent guidelines regulating the panies to disclose, in their annual reports, board commentary assessing conduct of public officials. the companies’ internal control and risk management systems. On 10 May 2012, MAS issued Risk Governance Guidance for Listed Boards to provide 23 Prohibitions practical guidance for board members on managing risk. Does the law prohibit both the paying and receiving of a bribe?
19 Prosecution under financial record keeping legislation Yes. Singapore law prohibits both the paying and receiving of a bribe. In particular, sections 5, 11 and 12 of the PCA prohibit both the paying of a Are such laws used to prosecute domestic or foreign bribery? bribe to, and receiving of a bribe by, a domestic public official. No. The laws primarily used to prosecute domestic or foreign bribery are the PCA and the Penal Code. 24 Public officials How does your law define a public official and does that 20 Sanctions for accounting violations definition include employees of state-owned or state- What are the sanctions for violations of the accounting rules controlled companies? associated with the payment of bribes? A public official is referred to as a ‘member, officer or servant of a public There are no specific accounting rules associated with the payment of body’ under the PCA. There are also specific provisions at section 11 of the bribes in Singapore. Sanctions for violations of the laws and regulations PCA in respect of members of parliament. ‘Public body’ has been defined relating to proper account-keeping, auditing, etc, include fines and terms in section 2 of the PCA to mean any ‘corporation, board, council, commis- of imprisonment. The amount of any fine and length of imprisonment will sioners or other body which has power to act under and for the purposes depend on the specific violation in question. Liability may be imposed on of any written law (ie, Singapore legislation) relating to public health or the company, directors of the company and other officers of the company. to undertakings or public utility or otherwise administer money levied or raised by rates or charges in pursuance of any written law’. 21 Tax-deductibility of domestic or foreign bribes In the Ng Boon Gay case and Public Prosecutor v Peter Benedict Lim Sin Pang DAC 2106-115/2012 (Peter Lim case) (in which the former Singapore Do your country’s tax laws prohibit the deductibility of Civil Defence Force Chief was found guilty and sentenced to six months domestic or foreign bribes? jail for corruptly obtaining sexual favours in exchange for the awarding of Tax deduction for bribes (whether domestic or foreign bribes) is not per- contracts), both the Central Narcotics Bureau (CNB) and the Singapore mitted. Bribing is an offence under the PCA and the Penal Code. Civil Defence Force (SCDF) were unsurprisingly held by the courts to be public bodies. In Public Prosecutor v Tey Tsun Hang [2013] SGDC 164 (Tey Tsun Hang case) (where the former law professor at National University of Domestic bribery Singapore was convicted for obtaining sex and gifts from one of his stu- dents but was later acquitted on appeal), despite the arguments of defence 22 Legal framework counsel, the National University of Singapore (NUS) was also found to be Describe the individual elements of the law prohibiting bribery a public body, being a ‘corporation which has the power to act […] relating to […] public utility or otherwise to administer money levied or raised by of a domestic public official. rates or charges’, since ‘public utility’ included the provision of public ter- The general prohibition on bribery in the PCA (see question 2) specifically tiary education. The receipt by NUS of funds from the government and its states, at section 5, that it is illegal to bribe a domestic public official. Where function as an instrument of implementing the government’s tertiary edu- it can be proved that gratification has been paid or given to a domestic pub- cation policy further supported the finding that NUS was a ‘public body’. lic official, section 8 provides for a rebuttable presumption that such gratifi- The provisions in the Penal Code pertaining to domestic public officials cation was paid or given corruptly as an inducement or reward. The burden use the term ‘public servant’. This has been defined in section 21 to include of proof in rebutting the presumption lies with the accused on a balance of an officer in the SAF, a judge, an officer of a court of justice, an assessor probability. In Public Prosecutor v Ng Boon Gay [2013] SGDC 132 (Ng Boon assisting a court of justice or public servant, an arbitrator, an office-holder Gay case), the prosecution argued that the threshold to establish the pre- empowered to confine any person, an officer of the Singapore government, sumption was very low and ultimately any ‘gratification’ given to a public an officer acting on behalf of the Singapore government and a member of official by someone intending to deal with the official or government would the Public Service Commission (PSC) or Legal Service Commission. be enough to create the rebuttable presumption. On the facts of the case, It would appear from the above definitions under the PCA and the however, the defence succeeded in rebutting the presumption. Prohibition Penal Code that an employee of a state-owned or state-controlled com- of the bribery of a domestic public official is also set out in sections 11 and pany may not necessarily be a domestic public official. Such employees of 12 of the PCA as outlined below. Section 11 relates to the bribery of a mem- state-owned or state-controlled companies may be considered domestic ber of parliament. It is an offence for any person to offer any gratification public officials if they fall within the definitions set out in the PCA and the to a member of parliament as an inducement or reward for such member’s Penal Code. It should also be noted that the Singapore Interpretation Act doing or forbearing to do any act in his capacity as a member of parliament. defines the term ‘public officer’ as ‘the holder of any office of emolument It will also be an offence for a member of parliament to solicit or accept in the service of the [Singapore] Government’. the above gratification. Section 12 relates to the bribery of a ‘member of a www.gettingthedealthrough.com 191 SINGAPORE Norton Rose Fulbright (Asia) LLP
25 Public official participation in commercial activities In addition, the domestic public official involved in corruption would Can a public official participate in commercial activities while be exposed to departmental disciplinary action, which could result in punishment such as dismissal from service, reduction in rank, stoppage serving as a public official? or deferment of salary increment, fine or reprimand and/or involuntary The Instruction Manual, which applies to all Singapore public officials, retirement. is a comprehensive set of rules which govern how public officials should Furthermore, the Instruction Manual debars companies that are guilty behave in order to avoid corruption. The Instruction Manual allows pub- of corruption involving public officials from public contract tenders. Other lic officials to participate in commercial activities but sets out certain measures include the termination of an awarded contract and the recovery restrictions, such as the public officials not being allowed to profit from of damages from such termination. their public position. The Instruction Manual details how public officials can prevent conflicts of interest from arising and when consents must be 30 Facilitating payments obtained. Consent is required for various investment activities such as Have the domestic bribery laws been enforced with respect to holding shares in private companies, property investments and entering facilitating or ‘grease’ payments? into financial indebtedness. The CPIB also advises domestic public officials not to undertake any As stated in question 6 above, facilitating or ‘grease’ payments are techni- paid part-time employment or commercial enterprise without the written cally not exempt under Singapore law. In particular, as regards domestic approval of the appropriate authorities. Subject to such safeguards and public officials, section 12 of the PCA prohibits the offering of any gratifica- approvals, a public official is allowed to participate in commercial activities tion to such officials as an inducement or reward for the official’s ‘perform- while in service. ing, or… expediting… the performance’ of any official act. Accordingly, it is also an offence under section 12 of the PCA for the domestic public official 26 Travel and entertainment to accept any gratification intended for the purposes above. Describe any restrictions on providing domestic officials 31 Recent decisions and investigations with gifts, travel expenses, meals or entertainment. Do the restrictions apply to both the providing and receiving of such Identify and summarise recent landmark decisions and benefits? investigations involving domestic bribery laws, including any investigations or decisions involving foreign companies. The analysis in question 5 will apply to both the giving and receiving of such benefits to and by domestic officials. It should also be noted that Two cases in particular stand out in the past year for clarifying the elements domestic public officials are not permitted to receive any money or gifts of corruption and demonstrating the need for foreign companies to be from people who have official dealings with them, nor are they permitted to aware of international reputational repercussions if their local franchisees accept any entertainment, etc, that will place them under any real or appar- or associated parties are involved or implicated in corruption. ent obligation. In Public Prosecutor v Leng Kah Poh [2014] SGCA 51 (the IKEA case), the Court of Appeal clarified that inducement by a third party was not neces- 27 Gifts and gratuities sary to establish a corruption charge under the PCA. In doing so, the Court of Appeal overturned an acquittal by the High Court of Leng Kah Poh, the Are certain types of gifts and gratuities permissible under your former IKEA food and beverage manager in Singapore, who had origi- domestic bribery laws and, if so, what types? nally been sentenced to 98 weeks of jail for 80 corruption charges. Leng There are no specific types of gifts and gratuities which are considered had reportedly received a S$2.4 million kickback for giving preference to a permissible under the PCA and the Penal Code. Any gift or gratuity is particular product supplier. The High Court overruled the conviction of the potentially caught by the PCA and Penal Code if it meets the elements trial court and acquitted Leng, holding that the conduct did not amount to required by the statutes and is accompanied with the requisite corrupt corruption because he had not been induced by a third party to carry out intent. the corrupt acts. The High Court held that an action for corruption would Domestic public officials are also subject to the requirements of the only succeed when there are at least three parties: a principal incurring Instruction Manual, which details the circumstances in which gifts and loss; an agent evincing corrupt intent; and a third party inducing the agent entertainment can be accepted and when they must be declared. As a mat- to act dishonestly or unfaithfully. The High Court held that in this case no ter of practice, all gifts need to be approved by a permanent secretary and third party existed and therefore the conduct alleged was not considered to only gifts under S$50 can be accepted. Any gift valued at more than S$50 amount to corruption under the PCA. However, in overturning the decision can only be kept by the public official if it is donated to a governmental of the High Court, the Court of Appeal noted that if inducement by a third department or independently valued and purchased from the government party were necessary, it would lead to absurd outcomes and undermine the by the public official. By comparison, in the Tey Tsun Hang case, the court entire object of the PCA. heard that the NUS Policy on Acceptance of Gifts by Staff requires consent In Teo Chu Ha v Public Prosecutor [2014] SGCA 45, a former director at to be sought for all gifts over S$100. Seagate Technology International (Seagate) received shares in a trucking company and subsequently assisted that company to secure contracts to 28 Private commercial bribery provide trucking services for Seagate. The High Court held that the con- duct did not amount to corruption as the rewards were not given for the Does your country also prohibit private commercial bribery? ‘purpose’ or ‘reason’ of inducement because they were not causally related Yes. The PCA contains provisions that prohibit bribery in general, and to the assistance Teo had rendered. Furthermore, Teo had paid considera- these prohibitions extend to both private commercial bribery as well as tion for the shares. The Court of Appeal overruled the High Court decision, bribery involving public officials. finding that a charge of corruption could still be made out when consid- eration was paid and it was not necessary to prove that consideration was 29 Penalties and enforcement inadequate or that the transaction was a sham. The Court of Appeal noted in particular that the purpose of the PCA would be undermined if it were What are the sanctions for individuals and companies violating interpreted to have such a narrow scope that could be circumvented by the domestic bribery rules? sophisticated schemes such as the one in the present case. The sanctions for individuals and companies violating the domestic brib- There were also several developments in the high-profile domestic ery rules are similar to those set out in question 15, apart from the following. bribery cases involving public officials and public bodies in the past year. The penalties for bribery of domestic public officials under the PCA These cases involved two former senior public officials allegedly obtaining are more severe than those for general corruption offences. While the gen- sexual gratification in exchange for favouring certain companies and a uni- eral bribery offences under sections 5 and 6 are punishable by a fine not versity professor allegedly obtaining sexual gratification and gifts from a exceeding S$100,000, imprisonment not exceeding five years, or both, the student in exchange for better grades. After a court trial that received wide bribery of a member of parliament or a member of a public body under sec- media attention, on 14 May 2013, the former director of CNB, Ng Boon tions 11 and 12 respectively may result in a fine not exceeding S$100,000, Gay, was acquitted of four charges of corruptly obtaining sexual gratifica- imprisonment for a term not exceeding seven years, or both. tion from a female sales executive in exchange for assisting to further the
192 Getting the Deal Through – Anti-Corruption Regulation 2015 Norton Rose Fulbright (Asia) LLP SINGAPORE business interests of her two IT company employers on the grounds that award contracts. The MND has since tightened its tender procedures, there was neither a corrupt element, nor guilty knowledge on the part of including requiring all deals with only one bid to be approved by the chief the accused as the parties were in a pre-existing romantic relationship. Ng executive or deputy chief executive of its agencies. Boon Gay was nevertheless subject to civil service disciplinary proceedings In a domestic bribery case in the private sector involving a foreign that resulted in his being retired from public service with effect from 29 company, the prosecution charged Mark Edward Tjong, a former business January 2014. On 31 May 2013, Peter Lim, the ex-commissioner of SCDF, director of Singapore-based ST Electronics, a member of the Singapore was convicted of one charge of corruptly obtaining sexual gratification Technologies group, with two counts of corruption for S$57,386 and from a female general manager of a vendor in the IT industry in exchange S$30,000 respectively. Mr Tjong had allegedly received gratification in for favouring the business interests of her employer. He later admitted to 2006 in exchange for appointing Mujibur Rahman, the managing direc- seven other corruption charges for trysts with two other women who were tor of a Bangladeshi firm called Kings Shipping and Trading Co, to assist working for technology companies that were also SCDF vendors, and was ST Electronics in a bid for a project involving the Bangladesh Police sentenced to six months in jail. On 28 May 2013, Tey Tsun Hang, a former Department. He was found guilty on one charge of corruption and sen- professor at NUS, was found guilty of six charges of corruption including tenced to eight weeks’ imprisonment and ordered to pay the sum of the two acts of sexual intercourse with, and the receipt of four gifts of vary- bribe he received, S$57,386, in default of three months’ imprisonment. ing monetary values from one of his law students and was sentenced to The defence is appealing against his conviction and sentence for the first five months in jail. However, after Tey served his jail sentence, his appeal charge and the prosecution is appealing against the acquittal of the second against both his conviction and sentence was upheld and he was acquitted charge. A related entity in the Singapore Technologies Group, ST Marine of all charges. The High Court found that the sex and gifts Tey had received – a shipyard providing shipbuilding, conversion and repair services world- were not inducements for better grades and therefore Tey’s actions did not wide – was also embroiled in a corruption scandal in which former senior amount to corruption. executives were implicated in conspiracies to bribe agents of customers A number of other public bodies also came under intense scrutiny for contracts. In December 2014, two former presidents, the former senior after internal audits uncovered discrepancies in procurement processes vice-president (Tuas Yard) and the former group financial controller and that suggested the possibility of bias. Notably, the National Parks Board’s senior vice-president (finance) of ST Marine, were charged with corruption (NParks) purchase of 26 Brompton bikes was referred to the CPIB for for conspiring to pay bribes in return for favours, such as ship repair con- investigation. The investigations did not lead to the framing of any corrup- tracts, and for conspiring to defraud the company through the falsification tion charges. However, the NParks assistant director who was at the centre of accounts and the making of petty cash claims for bogus entertainment of the controversy was charged with giving false information to investigat- expenses. Those proceedings are ongoing. ing officers from the Ministry of National Development (MND) about his In a development that will have a significant impact on the anti-cor- relationship with the director of the sole company involved in the tender ruption landscape in Singapore, the Prime Minister announced in January process to supply the bicycles to NParks. The NParks assistant director was 2015 that steps will be taken to boost the manpower of the CPIB by more fined the maximum penalty of S$5,000 for lying to the auditors but acquit- than 20 per cent, establish a central reporting centre for complaints to be ted of the second charge of abetting the director of the bicycle retailer to lie lodged and review and amend the PCA. Although it remains to be seen about their friendship to the MND internal auditors. Both sides appealed which aspects of the law will be revamped, there are some key areas which the investigations (the assistant director for lapses in the investigation, and may be the subject of legal reform. These could be the lowering of the evi- the prosecution for a heavier penalty) and both appeals were dismissed by dential threshold for the establishment of corporate liability, the introduc- the High Court in November 2014. The underlying issues in the public pro- tion of a compliance defence, the broadening of the extraterritorial effect curement system had been outlined in a report produced by the Auditor- of the PCA and the enactment of whistle-blower protection and incentivi- General in August 2012, which stated that the largest concern was the way sation laws. Further details on the review of the PCA are to be announced. agencies treated the role of approving authorities that have the power to
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Laura Martínez-Sanz and Jaime González Gugel Oliva-Ayala Abogados
1 International anti-corruption conventions who bribe or try to bribe foreign public officials so that they act or refrain To which international anti-corruption conventions is your from acting in relation to the performance of official duties. The aforemen- tioned article of the CC includes a specific definition of ‘foreign public country a signatory? official’, which matches the definition provided by the OECD Anti-bribery Spain is a signatory to the following conventions: Convention. In addition to this, article 445 CC requires an undue benefit (pecuniary or otherwise) and covers promises, bribes through intermediar- European Union ies and bribes to third parties. The Convention on the Fight against Corruption Involving Officials of the European Union or Officials of Member States of the European Union, 4 Definition of a foreign public official Brussels, 26 May 1997 (Convention on European Officials). How does your law define a foreign public official?
Council of Europe As mentioned above, paragraph 3 article 445 CC contains a definition of • The Criminal Law Convention on Corruption signed by Spain on 10 foreign public official: May 2005 and ratified on 28 April 2010. • any person who holds a legislative, administrative or judicial office in a • The Civil Law Convention on Corruption signed by Spain on 10 May foreign country, either by appointment or by election; 2005 and ratified on 16 December 2009. • any person who exercises a public duty for a foreign country, including • Additional Protocol to the Criminal Law Convention on Corruption a public body or a public company; and signed by Spain on 27 May 2009 and ratified on 17 January 2011. • any officer or agent of an international public organisation.
Other international organisations 5 Travel and entertainment restrictions The OECD Convention on Combating Bribery of Foreign Officials in To what extent do your anti-bribery laws restrict providing International Business Transactions, Paris, 17 December 1997, ratified on foreign officials with gifts, travel expenses, meals or 14 January 2000 (OECD Anti-Bribery Convention). The United Nations Convention against Corruption, New York, entertainment? 31 October 2003, ratified on 19 June 2006. Literally, the CC does not foresee exceptions to gifts, travel expenses, meals or entertainment. Any goods or compensations, despite its eco- 2 Foreign and domestic bribery laws nomic value, would fall under the scope of the legislation against bribery. Identify and describe your national laws and regulations prohibiting bribery of foreign public officials (foreign bribery 6 Facilitating payments laws) and domestic public officials (domestic bribery laws). Do the laws and regulations permit facilitating or ‘grease’ payments? Foreign bribery laws Article 445 of the Spanish Criminal Code (CC) establishes corruption in Facilitating payments – even if these are small – are not allowed, and they international business transactions as an autonomous crime. fall under the scope of the acts prohibited by the legislation against bribery. Specific provisions also exist for bribery of European Union officials under article 427 CC. The aforementioned article establishes a separate 7 Payments through intermediaries or third parties offence of both active and passive bribery of EU officials. In what circumstances do the laws prohibit payments through intermediaries or third parties to foreign public officials? Domestic bribery laws The relevant legislation on domestic bribery is contained in articles 419 to Article 445 of the CC expressly covers promises, bribes through interme- 426 CC. The provisions regarding passive bribery of domestic public offi- diaries and bribes paid for the benefit of a third party. However, the lack of cials are contained in articles 419 to 422 CC. In a case of ‘passive bribery’ cases reaching the Spanish courts demonstrate the difficulties in proving the criminal legislation punishes domestic public officials who commit whether an accused party had knowledge that a third party was going to bribery when asking for or receiving a bribe. It includes cases in which a divert payments to pay bribes. bribe is made in order to ensure that any official acts contrary to his or her duties (article 419) but also an act inherent to his or her office (article 420). 8 Individual and corporate liability Article 425 CC punishes ‘active bribery’, which refers to the individual Can both individuals and companies be held liable for bribery or entity that gives the bribe to the domestic public official. of a foreign official? Foreign bribery According to Spanish criminal legislation, both individuals and entities may be prosecuted for bribery of a foreign official, but there is a controver- 3 Legal framework sial exception to corporate criminal liability for state public entities: pub- Describe the elements of the law prohibiting bribery of a lic entities that belong to the Spanish regions, trades unions and political foreign public official. parties, inter alia (article 31-bis CC). Since 2010, the CC includes an autonomous offence of bribery a foreign public official (article 445). Thus, Spanish criminal law punishes those
194 Getting the Deal Through – Anti-Corruption Regulation 2015 Oliva-Ayala Abogados SPAIN
9 Civil and criminal enforcement citizens. In addition, there are some specific crimes that might be pros- Is there civil and criminal enforcement of your country’s ecuted outside Spanish frontiers even if these are committed by foreign- ers (treason, terrorism, piracy, etc). According to article 23 of the Spanish foreign bribery laws? Organic Act of the Judicial Power, however, the Spanish authorities have Bribery is a criminal offence, thus, enforcement of bribery laws will take no jurisdiction to prosecute foreign companies for bribing a foreign officer. place through criminal laws (mainly, the CC and the Spanish Criminal Procedure Act). In cases of damages caused by bribery offences, damaged 15 Sanctions parties may solicit compensation in the course of criminal procedures as What are the sanctions for individuals and companies violating civil parties. the foreign bribery rules? 10 Agency enforcement The CC foresees the following sanctions: penalties of imprisonment from What government agencies enforce the foreign bribery laws two to six years and an economic fine based on a figure per month (to be determined) lasting for 12 to 24 months, except when the benefit obtained and regulations? was greater than the resulting sum, in which case the fine will be an amount There is no specific government agency in Spain responsible for the enforce- ranging from the value to twice the value of the benefit. Besides the afore- ment of bribery laws. There is, however, a Special Public Prosecutor’s mentioned penalties, the person liable will be punished by a ban on con- Office against Corruption and Organised Crime that performs a central tracting with the public administration, as well as a ban on obtaining public role in the fight against corruption and domestic bribery. As mentioned subsidies or grants and of the right to have benefits or incentives from taxes in question 16 below, the activity of the Special Public Prosecutor’s Office or social security, and the prohibition on taking part in commercial trans- regarding cases of foreign bribery is currently quite low despite the fact actions with the public sector for between seven and 12 years. that the offence of foreign bribery came into existence in 2000. Penalties will imposed be in the higher range if the objects of the busi- ness were humanitarian goods or services, or other essential goods. 11 Leniency 16 Recent decisions and investigations Is there a mechanism for companies to disclose violations in exchange for lesser penalties? Identify and summarise recent landmark decisions or investigations involving foreign bribery. Article 31-bis CC foresees several activities that companies may carry out after the commission of the crime and through their legal representatives, Only a few cases related to foreign bribery have been investigated in Spain which may be considered as mitigating their criminal liability of legal and, as a result, no individual or company has been prosecuted or sanc- persons: tioned for this offence. • confessing the offence to the authorities, before any criminal proce- Since article 445 CC came into force in 2000, seven proceedings dure against the legal person has been brought; regarding possible bribery of foreign public officials have been opened, • collaborating in the investigation of the action, and producing, at any only two of which have gone beyond the stage of the preliminary inves- time during the proceedings, new evidence that is decisive to clear up tigation. First, the Costa Rica case was subject to an order of a Central the criminal liability arising from the facts; Magistrate’s Court to start judicial investigation in April 2008, but this was • proceeding, at any moment within the proceedings and before the stayed 18 months later on the basis of a request by the Public Prosecutor hearing, to repair or diminish the damage caused by the crime; and Office’s owing to the expiry of the statute of limitations (which was three • establishing, before the beginning of a hearing, effective measures years at the time). In the Angola case, the Central Magistrate’s Court to anticipate and detect crimes that could be committed in the future ordered the stay of proceedings in September 2011 after two years of inves- within the ranks of the legal person. tigations due to lack of evidence. Therefore, these investigations just led to preliminary investigations and no individuals were prosecuted. 12 Dispute resolution Financial record keeping Can enforcement matters be resolved through plea agreements, settlement agreements, prosecutorial discretion 17 Laws and regulations or similar means without a trial? What legal rules require accurate corporate books and records, According to the Spanish Criminal Procedure Act, it is possible to reach effective internal company controls, periodic financial an agreement and avoid trial. This agreement is known as conformidad statements or external auditing? and means the acceptance of liability by the accused party before the trial Legal rules requiring accurate company information are established in arti- in order to obtain a reduction of the penalty. Conformidad is available for cles 25 to 49 of the Spanish Commercial Code. This information must be offences foreseeing a penalty of up to six years’ imprisonment (articles 787 submitted in order to provide a clear image of the company’s assets, finan- of the Spanish Criminal Procedure Act), and could theoretically apply to cial situation and profits or losses. When this information is not enough to foreign bribery. This type of settlement, however, has never been used provide such clear picture of the company, additional supplementary infor- in foreign bribery cases by the time being so it is not possible to provide mation must be submitted. with information about the Public Prosecutor’s and courts’ policies in this From a criminal perspective, articles 290 to 297, and article 310 of regard. the CC establish that a crime is committed when any of the documents required by the Commercial Code is false or does not correctly reflect the 13 Patterns in enforcement real legal or economic situation of the company and that may cause dam- Describe any recent shifts in the patterns of enforcement of the age to the company itself, or any shareholders or third parties. foreign bribery rules. It is not necessary that any specific damage occurs. If the false infor- mation provided is potentially harmful, the crime is considered to have Since the amendment of article 445 CC mentioned above, which entered been committed. Sanctions will be increased accordingly in the event that into force in 2010, only a few foreign bribery investigations have been initi- any damage actually occurs. ated and all of them have been filed during the preliminary investigation phase. As a result, we cannot provide patterns of enforcement of these 18 Disclosure of violations or irregularities rules against foreign bribery. To what extent must companies disclose violations of anti- 14 Prosecution of foreign companies bribery laws or associated accounting irregularities? In what circumstances can foreign companies be prosecuted As a matter of law, in accordance with article 259 of the Spanish Criminal for foreign bribery? Procedure Act, there is a general obligation to inform a judge or prosecutor about the committing of any crime. As a matter of practice, however, in In general terms, the jurisdiction of the Spanish courts is restricted to our experience there have never been any sanctions imposed for breaching crimes committed in Spain or in a territory outside Spain by Spanish this duty. www.gettingthedealthrough.com 195 SPAIN Oliva-Ayala Abogados
19 Prosecution under financial record keeping legislation 24 Public officials Are such laws used to prosecute domestic or foreign bribery? How does your law define a public official and does that definition include employees of state-owned or state- The financial record keeping legislation, as mentioned in question 17, is included in both the Commercial Code and the CC and it is intended to controlled companies? provide a faithful picture of the company as a whole, as well as the sanc- The definition of public official is very broad and, therefore, affects any tions in the event any crime is committed. single person working in the public interest. More specifically, the defini- Likewise, the articles regulating bribery are also included in the CC, as tion of public official includes any person that, by law or appointed by the will be further explained in questions 22 and 29. competent authority, participates in the development of the public inter- est. Authorities, such as members of the parliament, the senate, legisla- 20 Sanctions for accounting violations tive chambers of the autonomous regions, the European Parliament and What are the sanctions for violations of the accounting rules prosecutors, inter alia, are also considered public officials as regards the associated with the payment of bribes? law of bribery.
The sanctions for violations of the accounting rules range from six months 25 Public official participation in commercial activities to three years’ imprisonment in its most basic form, as well as a fine that is Can a public official participate in commercial activities while determined taking into account the amount of the benefit. serving as a public official? 21 Tax-deductibility of domestic or foreign bribes Law 53/1984 of 26 December regulates conflicts of interest for public offi- Do your country’s tax laws prohibit the deductibility of cials. A public official is not allowed to be involved in any private activity domestic or foreign bribes? related to his or her public activity in the event that person is currently working in the public sector, or worked in the public sector in the last two Spanish tax laws state that bribes to foreign public officials are not tax- years or intends to work in the public sector in the future in that particular deductible. In addition to this, the Spanish Supreme Court has established activity. the non-deductibility of expenses incurred in connection to any unlawful This limitation includes being a member of the board of directors of conduct. private entities directly related to the position of the public official. It also includes any position in any licensed company, as well as any stockholding Domestic bribery of more than 10 per cent in any of the aforementioned companies. 22 Legal framework 26 Travel and entertainment Describe the individual elements of the law prohibiting bribery Describe any restrictions on providing domestic officials of a domestic public official. with gifts, travel expenses, meals or entertainment. Do the The CC regulates domestic bribery in articles 419 to 427. The CC was restrictions apply to both the providing and receiving of such amended on 22 June 2010, when all articles regarding domestic bribery benefits? were either amended or newly introduced. The concept of bribery differs depending on the individual case. A There are no specific provisions restricting the giving of gifts, travel public official falls within the scope of the anti-bribery law when receiving expenses, meals or entertainment to domestic officials. compensation in the following cases: • by carrying out an illegal act; 27 Gifts and gratuities • by carrying out a legal but unfair act; and Are certain types of gifts and gratuities permissible under your • by omission, meaning simply not doing and letting go. domestic bribery laws and, if so, what types?
Each case carries a different sanction. See question 5. The common elements are the following: • the offender must be a public official (see question 24); 28 Private commercial bribery • the objective element requires that the action be related to the post of Does your country also prohibit private commercial bribery? public official; and • the aforementioned action must be the act of requesting or receiving Yes. The latest amendment to the CC (2010) introduced article 286‑bis, any sort of compensation, as well as the offer or promise, as a conse- which specifically prohibits private commercial bribery. quence of his or her behaviour. The sanctions imposed will range from six months to four years’ imprisonment with a special ban from any commercial activity for one The anti-bribery law helps to maintain the efficacy and reputation of the to six years and a fine that can be up to three times the monetary bene- Public Administration. In order to achieve this fundamental goal, it is also fits received. These sanctions can be adjusted by the judge by taking into intended to guarantee the impartiality of public officials. account the benefit received and the responsibilities of the person involved Although the bribery of a public official might be considered as in the bribery. bilateral in nature, under the more strict new regulation no agreement is required in order to commit bribery; therefore, it may be considered a 29 Penalties and enforcement unilateral crime. In other words, the crime is committed just by the mere What are the sanctions for individuals and companies violating request or offering. the domestic bribery rules?
23 Prohibitions As mentioned and explained in question 22, there are different forms of bribery. Therefore, depending on whether the behaviour of the public offi- Does the law prohibit both the paying and receiving of a bribe? cial was illegal, legal but unfair, or by omission, there will be different sanc- The anti-bribery articles of the CC are clear about this question. The tions. In relation to the other party to the bribery that is not a public official, law prohibits not only the payment and receiving of a bribe, but also the the same sanctions will be imposed, as the law treats all parties equally and demand, offer or promise of any sort of compensation as a payment due homogeneously in this regard. related to a certain act. The sanctions imposed range from six months’ to six years’ imprison- The spirit of the law is to treat all persons involved in bribery equally. ment, fines and special disqualifications depending on the seriousness of As a consequence, the sanctions are the same for both the public official the crime committed. and any third party.
196 Getting the Deal Through – Anti-Corruption Regulation 2015 Oliva-Ayala Abogados SPAIN
31 Recent decisions and investigations Update and trends Identify and summarise recent landmark decisions and With respect to foreign bribery, there are no new relevant cases or investigations involving domestic bribery laws, including any trends to be highlighted. On the contrary, prosecutions of corruption investigations or decisions involving foreign companies. cases have increased during the past year, with new procedures opened against national public servants concerning all kinds of In relation to the efficiency of the anti-bribery laws, the perception is that corruption, including passive and active bribery. In general terms, enough rules exist to combat bribery issues, but the implementation of the fight against bribery and corruption is – beside the economic such law is considered to have been affected by serious flaws. crisis – the main concern of Spanish society. Thus our courts and the Having said this, corruption cases are arising at an increasing rate. Public Prosecutor’s Office are taking a stronger stance against such In particular, there are currently cases under investigation that affect crimes. members of the Spanish royal family, as well as politicians at the highest level, independently of the party in which they serve. In addition to this, and taking into account the economic crisis affecting Spain in particular, 30 Facilitating payments this is now one of the main concerns for Spanish society, and therefore an Have the domestic bribery laws been enforced with respect to improvement is expected with regard to the implementation and effective application of the rules set out to address the issue. facilitating or ‘grease’ payments? In relation to investigations or decisions involving foreign companies See question 6. see question 16.
Laura Martínez-Sanz [email protected] Jaime González Gugel [email protected]
c/ Miguel Ángel 14, 3rd floor Tel: +34 91 391 12 90 28010 Madrid Fax: +34 91 310 34 55 Spain www.oliva-ayala.com
www.gettingthedealthrough.com 197 SWEDEN Advokatfirman Delphi
Sweden
Olof Rågmark and Sofia Bruno Advokatfirman Delphi
1 International anti-corruption conventions assignments (including self-employed persons without principals). Inter To which international anti-corruption conventions is your alia, ‘an assignment’ can be based on a contract, an appointment, duty or the outcome of an election. country a signatory? Swedish law on bribery does not differentiate between bribery of for- Sweden is a signatory to the following anti-corruption conventions: eign public officials and domestic public officials, thus the same legal rules • UN Convention against Corruption (UNCAC), 31 October 2003; are applicable to bribery of both foreign and domestic subjects. • UN Convention against Transnational Organized Crime (UNTOC), 15 In addition to the provisions on bribery described above, the revised November 2000; Swedish legislation on bribery also introduced a wider concept of the law • OECD Convention on Combating Bribery of Foreign Public Officials enforcement by including two new provisions regulating entirely new in International Business Transactions, 17 December 1997; offences in Swedish law: ‘trading in influence’ and ‘negligent financing • Council of Europe Criminal Law Convention on Corruption, 27 of bribery’. The offence of trading in influence only applies to the public January 1999, with certain reservations with respect to articles 12, 17, sector (ie, not to the private sector) and targets decisions and acts in con- and 37; nection with the exercise of public authority and public procurement. The • Council of Europe Additional Protocol of Criminal Law Convention offense covers both the active and the passive sides of the criminalised act on Corruption, 15 May 2003; (the transaction). It targets a third party as the recipient of an improper • Council of Europe Civil Law Convention on Corruption, 4 November reward (ie, another person than the person whose decisions or actions are 1999; intended to be influenced by the improper reward) who can influence the • EU Convention on the Protection of the European Communities’ other person in his or her performance of duties (the recipient is ‘trading Financial Interests (first and second protocol), 26 July 1995; the influence’). The negligent financing of bribery offence covers a form of • Council of Europe Convention on Laundering, Search, Seizure and contributory involvement in the crime of bribe giving because it targets sit- Confiscation of the Proceeds from Crime, 8 November 1990; uations where a company provides money or other assets to a middleman • Council of Europe Resolution (99) 5 of the Committee of Ministers of or agent who acts on behalf of the company and thus by gross negligence the Council of Europe: Agreement Establishing the Group of States furthers bribe giving, gross bribe giving or trading in influence. According against Corruption; and to established principles of Swedish law, only physical persons can be held • Council of Europe Resolution (97) 24 of the Committee of Ministers liable of a crime but with regard to the offence negligent financing of brib- of the Council of Europe: Twenty Guiding Principles for the Fight ery also representatives of a company (ie, persons with a leading position) Against Corruption. can be held liable and thus some kind of indirect corporate liability. As a complement to the Swedish legislation on bribery, the Swedish 2 Foreign and domestic bribery laws Institute Against Bribery (IMM) has published a Code on Gifts, Rewards and Benefits in the Business Sector. The code was first published on 4 Identify and describe your national laws and regulations September 2012, and aims to be part of the self-regulation of the business prohibiting bribery of foreign public officials (foreign bribery sector, a helpful complement to the Swedish anti-corruption regulation. laws) and domestic public officials (domestic bribery laws). The code is considered stricter than the Swedish legislation on bribery and The basic provisions on bribery are found in the Swedish Penal Code, thereby provides a good indication whether a particular action is in com- Chapter 10, headed ‘On Embezzlement, Other Acts of Breach of Trust pliance with Swedish law. On 9 December 2014 IMM published a revised, and Bribery’. Effective from 1 July 2012, Sweden has enacted a revised and even stricter, version of the code where it can be noted particularly that updated legislation on bribery. The principal cases of bribery are listed in within the private sector, a stricter approach approach has been taken to section 5(a) and section 5(b) and are referred to respectively as ‘taking a gifts or services of a morally questionable nature. According to the IMM bribe’ and ‘giving a bribe’. If an offence referred to in these provisions is Secretary-General Helena Sundén, the code was revised because Swedish considered gross, the offender will be convicted of gross bribe-taking or industry requested more stringent rules and codes of conduct for busi- gross bribe-giving in accordance with a specific provision, section 5(c). ness relationships both within the public as well as the private sector. The When assessing if an offence is gross, it will be taken into account whether revised code also clearly sets out that it is superiority to customary prac- the offence involved the abuse of or the targeting of a position involving tice or general sectorial rules unless such rules are stricter. In such a case, important responsibility, concerned a significant amount, was part of sys- the more stringent rules shall apply. In September 2013 the IMM set up an tematic criminal activity or criminal activity of large proportions or oth- Ethics Committee which, for a fee, provides the business sector with infor- erwise was of a particularly dangerous kind, etc. The provisions on taking mation about the code and its scope of application in practical matters. and giving a bribe are very similar to each another and they both consist The guidance from the IMM Ethics Committee is published on its website. of three key elements: During its first year (2013), the IMM Ethics Committee published two deci- • the persons involved; sions. During 2014 the Committee published another five decisions con- • the relationship within which the reward is given (ie, that the reward cerning both the public and the private sector. The decisions can be found must be given or accepted for the execution of employment or an on IMM’s website (English summaries are available). From the decisions assignment); and it can be seen that the Ethics Committee has a considerably stricter posi- • the nature of the reward itself (ie, that the reward is improper). tion in situations where rewards are directed towards the public sector. In one of the decisions from 2014 (No. 2014:3) the Ethics Committee held The bribery provisions are applicable to corrupt acts both within the public it improper to offer lunch with a modest value of 20 kronor to employees and the private sectors and cover all employees and persons performing of the public sector. This was not considered to be an established and
198 Getting the Deal Through – Anti-Corruption Regulation 2015 Advokatfirman Delphi SWEDEN accepted benefit between the private and the public sector and therefore a foreign state’s authority, anyone exercising a foreign arbitral assignment not in line with the IMM code. and a member of a supervisory body, decision-making body or parliamen- Acts of corruption may, in addition to the provisions on bribery, violate tary assembly in an international or supranational organisation of which other Swedish laws such as the Marketing Act, the Competition Act, the Sweden is a member. Income Tax Act and the Public Procurement Act. 5 Travel and entertainment restrictions Foreign bribery To what extent do your anti-bribery laws restrict providing 3 Legal framework foreign officials with gifts, travel expenses, meals or Describe the elements of the law prohibiting bribery of a entertainment? foreign public official. As mentioned in question 3, there is no de minimis exception or limitation as to what can be construed as an illicit reward. Instead one must look to Initially, it is important to note that there are no specific laws or provisions all relevant circumstances of each case in order to assess whether a reward targeting foreign bribery, thus the same provisions apply to both domestic is to be deemed improper. An important factor, in addition to the value of and foreign bribery. the reward, is the nature of the position or employment of the recipient. There are three key elements of the bribery provisions: the parties Rewards given to those working in the public sector are more likely to be involved; the relationship within which the reward is given; and the nature deemed improper than those given to employees in the private sector. An of the reward itself. The first element will be discussed in detail below (see important difference between the public and the private sector is whether question 4) and the second and third elements are discussed in the follow- the reward is given openly or in secrecy. The fact that a reward is given ing paragraphs. in the open or with the knowledge of the receiver’s principal is rarely an Criminal acts of bribery consist of ‘receiving, accepting a promise of eligible defence when the act concerns the public sector. However, if the or demanding’ or ‘giving, promising or offering’ an improper reward for act is carried out in the private sector, the knowledge by the principal could the execution of the employment, the assignment or the performance of serve as a successful defence, since the main purpose of the criminal provi- certain other official duties. The nexus between the taking or giving of the sions (in relation to the private sector) is to protect the principal’s interest bribe and the performance of the bribe-taker’s duties is a key element of of being able to trust his or her employees. A reward is normally deemed both the bribery-taking and the bribe-giving provision. The relationship as proper if it is a customary element of the employment, such as business between the parties must be of a professional nature, which means that the meals or educational trips. The expenditure must, however, be reasonable. recipient must be in a position where he or she has a practical possibility to Business expenditure related to entertainment or promotion of a company influence a decision or act upon which the giver is dependant in any way. may also be deemed as proper provided that it is reasonable and necessary. It is irrelevant whether the receiver was actually influenced by the bribe and the prosecutor does not even have to prove a fraudulent intent, instead 6 Facilitating payments the relevant question is if the giver and the receiver have a professional or business relationship to each another. The Penal Code defines the briber Do the laws and regulations permit facilitating or ‘grease’ as ‘any person’, thus the scope of the paragraph is broad. A person can- payments? not escape responsibility by acting through a third party such as an agent, Swedish anti-corruption regulation does not exempt facilitation or grease instead that third party can also be held responsible for complicity. payments from the criminalised area. Even a reward of a low value may The Penal Code defines illicit payments as ‘an improper reward’. In constitute an illicit bribe if the key elements of the bribery provisions are theory, anything of direct or indirect value to the recipient can be consid- met. ered an improper reward. The key element is the word ‘improper’ and the interpretation of what should be viewed as improper will ultimately rest 7 Payments through intermediaries or third parties upon the notions of morality and ethics. The word ‘improper’ is ambiguous and an individual assessment in each case is necessary. Every transaction In what circumstances do the laws prohibit payments through with the intent of having an effect on the way the recipient performs his or intermediaries or third parties to foreign public officials? her duties shall be deemed improper. If there is evidence of the recipient performing his or her duties in a wrongful way or if there is proof of that An individual cannot escape criminal liability by acting through a third being intended, the reward should again be deemed improper. If there is party such as an intermediary. He or she will either be held responsible as no evidence of corrupt intent, the assessment is more difficult to make. An the perpetrator for complicity or for instigation. The third party furthering important factor in the assessment is the value of the reward. A reward of the crime also risks liability for complicity. In the revised Swedish legis- an exceptionally low value runs little to no risk of being able to influence lation there is a specific provision targeting, inter alia, payments through the way the recipient performs his or her official duties and is therefore intermediaries or third parties. Section 5(e) Chapter 10 of the Swedish unlikely to be deemed improper. Penal Code includes ‘negligent financing of bribery’. This provision targets a situation where a company funds a middleman acting on behalf of the 4 Definition of a foreign public official company, and thus by gross negligence furthers bribe-giving, gross bribe- giving or trading in influence, and so prohibits payments via third parties. How does your law define a foreign public official? A bribe-taker, such as a foreign public official, is defined in Chapter 10, -sec 8 Individual and corporate liability tion 5(a), subsection 1 of the Penal Code. The bribe-taker is defined as an Can both individuals and companies be held liable for bribery employee or a person performing an assignment, who receives, accepts a of a foreign official? promise of or demands an improper reward for the execution of employ- ment or the assignment. The provision also applies to a person who par- According to established legal principles in Swedish law, only physical ticipates in or is a functionary of a competition subject to publicly arranged persons can be held criminally responsible, which eliminates legal entities betting if he or she receives an improper reward for his or her performance from criminal charges. If, for example, a company carries out illicit pay- of duties in the competition. Subsections 2 and 3 of the same provision then ments, the physical persons who participated in the corrupt activity such state that the provision also applies in a situation where an offence was as board members or employees will be held responsible. A corporation committed before the offender received a position referred to in subsec- can, however, under specific circumstances, be subject to a fine (see ques- tion 1 or after the offender has left such position, and also to a person who tion 15). As described above, the category of persons that can be held liable receives accepts a promise of or demands an improper reward on behalf of for bribery has widened in the revised Swedish legislation on bribery to another person. Thus, the provision targets politicians performing public cover all employees and persons performing assignments, including man- functions and services within the Swedish government or municipalities as agement. For example, the persons who can be held liable for ‘negligent well as those acting as fiduciary in legal, economic, scientific or technical financing of bribery’ are representatives of the company. Thus some kind matters such as directors of companies, brokers, commercial agents, com- of indirect corporate liability can now also be realised under Swedish law missions agents and legal consultants (ie, all employees and persons per- in addition to individual liability. forming assignments). The provision encompasses foreign officials such as a foreign state’s minister or member of parliament, anyone exercising www.gettingthedealthrough.com 199 SWEDEN Advokatfirman Delphi
9 Civil and criminal enforcement against corruption have increased within the Swedish judicial system. On Is there civil and criminal enforcement of your country’s the whole, the focus on corruption has increased in Sweden. According to Transparency International, Swedish authorities are ‘limitedly’ active foreign bribery laws? in their enforcement actions regarding foreign bribery cases and Sweden Criminal enforcement is handled by the National Anti-Corruption Unit has more work to do in order to live up to its obligations under the (see question 10). OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The convention currently has 41 10 Agency enforcement signatory countries and each year Transparency International publishes a progress report to evaluate the enforcement action taken by each nation, What government agencies enforce the foreign bribery laws ‘Exporting Corruption, progress report 2014: assessing enforcement of the and regulations? OECD convention on combating foreign bribery’. The parties are classi- The National Anti-Corruption Unit is a national prosecution office within fied according to four categories: ‘active enforcement’, ‘moderate enforce- the Swedish Prosecution Authority, specialising in combating corruption. ment’, ‘limited enforcement’ (new category since 2013) and ‘little or no It has been acting in its present form since 2005 and consists of eight spe- enforcement’. The classification is based on the number and importance cially trained prosecutors and three accountants. The Anti-Corruption of cases and investigations brought by each nation, taking into account Unit handles all criminal cases of bribery and bribe-taking as well as the size of the nation’s exports. Sweden, along with Argentina, France, other offences closely linked to corruption. Within this area there is also Hungary, Norway, Portugal, New Zeeland and South Africa are classified a specialised unit under the National Police Board, The National Anti- in the 2014 report in the limited enforcement category, which is consid- Corruption Police, which was established during 2012. As mentioned ered an inadequate deterrent. With regard to Sweden, Transparency in question 2, the IMM also has a limited role as an enforcing agency as International cited in the 2013 report inadequacies in the Swedish legal it administers the Code on Gifts, Rewards and Benefits in the Business framework such as inadequate provisions for holding corporations respon- Sector (complementary regulation to the bribery legislation) as well as pub- sible for bribery and inadequate sanctions (relating to fines in particular) lishing the practical guidance offered by the IMM Ethics Committee. The inadequate resources, complaint mechanisms and whistle-blower protec- IMM is a non-profit organisation within the business sector established in tion (Sweden lacks legislation for the protection of whistle-blowers), inad- 1923 by the Stockholm Chamber of Commerce, the Federation of Swedish equate training of investigators and lack of public awareness-raising as key Industries and the Swedish Retail Federation. The aim of the institute is, inadequacies in enforcement. inter alia, to spread knowledge about the legal provisions against bribery Transparency International recommended that Sweden, among other and corruption, to make public legal cases in this field, to provide the pub- things: lic with advice on interpretation and usage of relevant legislation and to • follows up on the implementation on the revised provisions for liability combat the system of illegal payments. of companies for bribery carried out through subsidiaries, joint ven- tures or agents; 11 Leniency • introduces heavier fines for legal persons; and • introduces an effective, specific law providing protection for Is there a mechanism for companies to disclose violations in whistleblowers. exchange for lesser penalties? There is no such mechanism provided for by Swedish law. In general, this In the 2014 report Transparency International states that Sweden along is not the way Swedish law works – only in two areas of law is it possible to with Norway are in the position to move into the ‘moderate enforcement’ reduce or avoid penalties by providing information voluntarily. These are category if the ongoing investigations in the countries turn into prosecu- in tax law and in competition law. However, the revised Swedish legislation tions. Sweden is working to combat corruption and increase transparency, on bribery – specifically the provision on negligent financing of bribery – both in the public and private sectors. Although there have been some posi- will have a significant impact on Swedish corporations and organisations tive developments during the past year, including, for example, initiatives that evidently need to take preventive measures. Since the Swedish legisla- of greater transparency in the funding of political parties and improvement tor has not published any specific guidance as to what constitutes adequate of the protection of whistle-blowers, a lot of work still remains and public preventive measures, we must rely on international best practice and the procurement situations are still particularly at risk of corruption in Sweden. basic components of a compliance programme. Compliance programmes In July 2013 the Swedish National Council for Crime Prevention pub- are generally of growing importance, both to national and international lished a report entitled ‘Reported corruption in Sweden – structure, risk corporations and organisations. factors and countermeasures’. As the title indicates, the report assesses reported corruption in Sweden, ie, corruption that has been detected 12 Dispute resolution and reported. The report is based on cases received by the National Anti- Corruption Unit. Between the years 2003 and 2011 the unit investigated Can enforcement matters be resolved through plea 684 cases that are now closed, in addition to 1,284 alleged corruption cases. agreements, settlement agreements, prosecutorial discretion The report cannot be said to provide a complete picture of the corruption or similar means without a trial? in Sweden but still it provides a valuable indication of circumstances that In contrast to other jurisdictions of the world, Swedish law does not pro- could lead to corruption and which industries and sectors are particularly vide for plea or settlement agreements. The prosecutor may, however, vulnerable. Overall, the report shows that there are problems related to decide on a summary penalty order foregoing a formal trial. In such cases corruption in Sweden and these must, of course, be taken seriously and the prosecutor decides for the defendant to be sentenced to probation and dealt with. The report should be seen as an important contribution to the or to pay a fine, provided that the defendant pleads guilty to the crime. work of taking actions against corruption in Sweden, by outlining areas of risk factors and increasing awareness of this within municipal depart- 13 Patterns in enforcement ments, public authorities and private companies. The hope is obviously that increasing knowledge and awareness will lead to preventive measures Describe any recent shifts in the patterns of enforcement of the against corruption being taken to a larger extent and thus reduce corrup- foreign bribery rules. tion within society. Within this area, the most recent shift in Sweden is still the revision of the Swedish legislation on bribery in 1 July 2012. The revised legislation is a 14 Prosecution of foreign companies more modern legislation intended to be stricter and more comprehensive In what circumstances can foreign companies be prosecuted but also simpler and better adapted to its purpose. Whether and to what for foreign bribery? extent the legislator has succeeded such as by making it less tempting to bribe or influence decisions involving improper rewards and to punish, in a Corporations are legal entities and may as such not be held criminally wider contexts and to a greater extent, such offences when they do occur, liable under Swedish law. Individuals associated with a corporation may, is yet too early to say. however, be held criminally responsible provided that Swedish courts have During the past year anti-corruption has been a hot topic in the jurisdiction. A crime committed in Sweden is always under the jurisdiction Swedish media and, at the same time, the awareness of and actions of Swedish courts. Specific rules apply for acts of bribery and bribe-taking
200 Getting the Deal Through – Anti-Corruption Regulation 2015 Advokatfirman Delphi SWEDEN committed outside of Swedish territory. According to Chapter 2 of the issued a judgment concerning foreign bribery where two former execu- Penal Code, Swedish courts have jurisdiction over acts committed abroad tives of Sweco were convicted. The case concerned Sweco’s involvement in if the act was committed by a Swedish citizen or a foreign citizen living a public bidding process over a public water supply project in the Ukraine. in Sweden; a foreign citizen who after the crime was committed became The former executives were given conditional sentences equivalent to four a Swedish citizen or lives in Sweden or a Danish, Norwegian, Finnish or and five months, respectively, in prison. The judgment has been appealed. Icelandic citizen while in Sweden; a foreign citizen while in the territory In recent years, there have been six investigations initiated, specifi- of Sweden if the crime is punishable by six months’ imprisonment. A pre- cally two in 2011, three in 2012 and one in 2013. One of these investigations requisite for prosecution in the above-mentioned cases is that the act was regards Telia Sonera’s activities for obtaining a mobile communication criminalised in the state where it was committed. Local practice where licence in Uzbekistan. The investigation was initiated in 2012, the activi- the act was committed must be taken into consideration when a Swedish ties have been under scrutiny since then and the company faces possible court establishes whether a reward is to be deemed as proper or improper charges. As of December 2014 the case is still ongoing. according to Swedish law, which may cause a discrepancy between the legality of rewards given or accepted in or outside the territory of Sweden. Financial record keeping 17 Laws and regulations 15 Sanctions What legal rules require accurate corporate books and records, What are the sanctions for individuals and companies violating effective internal company controls, periodic financial the foreign bribery rules? statements or external auditing? Both bribe-taking and bribe-giving are, according to the Penal Code, pun- ishable by a fine or imprisonment for two years at the most. If the crime There are a number of Swedish laws regulating requirements in relation to is gross it is punishable by imprisonment for at least six months and for accurate corporate books and records, effective internal company controls, six years at the most. The offences ‘trading in influence’ and ‘negligent periodic financial statements and external auditing. The following list is financing of bribery’ are also, according to the Penal Code, punishable by not exhaustive: a fine or imprisonment of up to two years. In addition to the criminal sanc- • the Companies Act (2005:551); tions provided for by the provisions on bribe-taking and bribe-giving, an • the Swedish Act on Partnerships and Non-registered Partnerships employee guilty of bribe-taking stands the risk of additional sanctions pro- (1980:1102); vided for by labour law such as dismissal or salary reduction. Furthermore, • the Accounting Act (1999:1078); the Penal Code criminalises actions such as unlawful disposal and breach • the Auditing Act (1999:1079); of faith and breach of duty. • the Accountants Act (2001:883); Accountancy law provides an efficient complement to the provisions • the Annual Reports Act (1995:1554); on bribery and bribe-taking, as all businesses have a legal duty to be able • the Income Tax Act (1999:1229); and to verify all commercial transactions. The court may also declare illicit • the Money Laundering and Terrorist Financing (Prevention) Act payments confiscated to the state treasury, unless it would be manifestly (2009:62). unreasonable to do so. This includes not only the illicit payment itself, but also estimated economic advantages resulting from the crime. If, for In addition, companies listed on a Swedish stock exchange are subject to example, a corporation has been able to secure an advantageous business listing contracts, which provide for fines, or at worst a combination of fine deal by bribing its counterpart, the actual or estimated profits from that and delisting, in case of breach of the contract. business deal may be confiscated. Bribery offences may also lead to disbarment from public procurement 18 Disclosure of violations or irregularities according to Chapter 10 of the Public Procurement Act. As mentioned, an To what extent must companies disclose violations of anti- entity with a legal personality cannot be subject to criminal charges. It can, bribery laws or associated accounting irregularities? however, under specific circumstances be subject to a fine. If the criminal act of bribery or bribe-taking has been committed in the name of a cor- There is nothing formally stipulated regarding disclosure of violations; poration and the person acting is a high-level employee such as a vice- however, under the Accounting Act and the Income Tax Act it is evident president or a board member, or if a corporation has failed to do what could that a payment of a bribe is likely to trigger accounting as well as tax issues. be expected of it to prevent the criminal act, the corporation may be subject Furthermore, a company listed on any of the Swedish stock exchanges is to a fine in accordance with the Penal Code. The fine may range from 5,000 also likely to be in conflict with the listing contract as there is a require- to 10 million kronor. ment under these contracts to report matters which may affect the price of the shares. However, so far there are no known cases of companies having 16 Recent decisions and investigations been penalised or required to pay fines for a breach of these rules based on improper accounting of expenses or similar. Identify and summarise recent landmark decisions or investigations involving foreign bribery. 19 Prosecution under financial record keeping legislation According to the report published by the Swedish National Council for Are such laws used to prosecute domestic or foreign bribery? Crime Prevention, previously mentioned in question 13, 43 of the cases received by the National Anti-Corruption Unit has some kind of inter- No, only the bribery provisions of the Penal Code are used to prosecute national connection. Of the cases, the private sector accounts for almost domestic or foreign bribery. However, the Swedish Anti-Corruption Unit two-thirds (63 per cent). The cases concern different situations such as investigates and prosecutes cases of both bribery as well as economic Swedish employees who have been offered bribes from foreign suppliers crimes related to bribery. and Swedish citizens working abroad who allegedly have given bribes in the country of employment. 20 Sanctions for accounting violations The National Anti-Corruption Unit has had little practice in enforce- What are the sanctions for violations of the accounting rules ment action involving acts of bribery taking place abroad. Since 2009, associated with the payment of bribes? three cases have commenced in Sweden – one in 2009, one in 2012 and one in 2013. The 2009 case was concluded in April 2012 with the conviction of An individual who intentionally or through carelessness neglects the obliga- two former executives of Volvo Construction Equipment International AB, tion to maintain accounts in accordance with the Auditing Act (1999:1078) a subsidiary of Volvo AB, for paying bribes to the Saddam Hussein regime by failing to keep accurate records and books may be sentenced for a book- related to the United Nations’ Oil-for-Food Programme. The executives keeping crime to imprisonment for two years at the most or, if the crime received suspended sentences of two years’ imprisonment and fines of is petty, to a fine. If the crime is considered gross, the perpetrator can be 120,000 and 60,000 kronor, while charges against a third executive were sentenced to imprisonment for a minimum of six months and a maximum dropped. Two former managers of the truck manufactures Scania AB were of six years according to Chapter 11, section 5 of the Penal Code. charged in November 2012, also in connection to illicit payments relating to the Oil-for-Food Programme. On 17 July 2013, the Stockholm City Court www.gettingthedealthrough.com 201 SWEDEN Advokatfirman Delphi
21 Tax-deductibility of domestic or foreign bribes 24 Public officials Do your country’s tax laws prohibit the deductibility of How does your law define a public official and does that domestic or foreign bribes? definition include employees of state-owned or state- controlled companies? Illicit payments are not deductible according to Chapter 9, section 10 of the Income Tax Act (1999:1229). The bribery provisions of the Swedish Penal Code do not distinguish between acts of bribery taking place in the private and public sector. Thus Domestic bribery both public officials and employees of private entities are encompassed by the bribery provisions. However, there are differences between the public 22 Legal framework and the private sector as regards case law. A reward that may be deemed Describe the individual elements of the law prohibiting bribery proper in a private sector context may be deemed improper in a public sec- of a domestic public official. tor context. Exercising public authority is regarded as an area specifically worthy of protection from undue influence, and employees of state-owned The answer to this question is similar to that to questions 3 and 4, as the or state-controlled companies may very well be included in this sphere. same provisions apply to both foreign and domestic bribery. There are three key elements of the bribery provisions, namely the 25 Public official participation in commercial activities parties involved, the relationship within which the reward is given and nature of the reward itself. Can a public official participate in commercial activities while The Penal Code defines the briber as ‘any person’, thus the scope of serving as a public official? the paragraph is broad. A person cannot escape responsibility by acting There are no general Swedish rules prohibiting public officials from partici- through a third party such as an agent. A bribe-taker is defined in Chapter pating in commercial activities. 10 section 5(a) of the Penal Code. The bribe-taker is defined as an employee or a person performing an assignment, who receives, accepts a promise of 26 Travel and entertainment or demands an improper reward for the execution of the employment or assignment. The provision also states that, in addition to employees, a per- Describe any restrictions on providing domestic officials son who participates in or is a functionary of a competition subject to pub- with gifts, travel expenses, meals or entertainment. Do the licly arranged betting fall within the scope of possible bribe-takers. Thus, restrictions apply to both the providing and receiving of such the provision targets politicians performing public functions and services benefits? within the Swedish government or municipalities as well as those acting as fiduciary in legal, economic, scientific or technical matters such as direc- As mentioned above (see questions 3 and 5), there is no de minimis excep- tors of companies, brokers, commercial agents, commissions agents and tion or limitation as to what can be construed as an illicit reward. Instead legal consultants. one must look at all the relevant circumstances of each case in order to The criminal acts of bribery consist of ‘giving, promising or offering’ or assess whether a reward is to be deemed improper. An important factor, in ‘receiving, accepting a promise of or demanding’ a bribe or other improper addition to the value of the reward, is the nature of the position or employ- reward for the performance of official duties. The nexus between the giv- ment of the recipient. Rewards given to those working in the public sec- ing or receiving of the bribe and the performance of the receiver’s duties is tor are more likely to be deemed improper than those given to employees a key element of both the bribery and the bribe-taking provision. The rela- in the private sector. An important difference between the public and the tionship between the parties must be of a professional nature, which means private sector is whether the reward is given openly or in secrecy. The fact that the recipient must be in a position where he or she has a practical pos- that a reward is given in the open or with the knowledge of the receiver’s sibility of influencing a decision or act upon which the giver is dependant in principal is rarely an eligible defence when the act concerns the public sec- any way. It is irrelevant whether the receiver was indeed influenced by the tor. However, if the act is carried out in the private sector, the knowledge bribe and the prosecutor does not even have to prove a fraudulent intent, of the principal could serve as a successful defence, since the main purpose instead the relevant question is if the giver and the receiver have a profes- of the criminal provisions (in relation to the private sector) is to protect the sional or business relationship to each another. principal’s interest of being able to trust his or her employees. A reward The Penal Code defines illicit payments as ‘a bribe or other improper is normally deemed as proper if it is a customary element of the employ- reward’. In theory, anything of direct or indirect value to the recipient can ment, such as business meals or educational trips. The expenditure must, be considered a bribe or an improper reward. The key element is the word however, be reasonable. Business expenditure related to representation or ‘improper’ and the interpretation of what should be viewed as improper will promotion of a company may also be deemed as proper provided that it is ultimately rest upon the notion of moral and ethics. The word ‘improper’ is reasonable and necessary. ambiguous and an individual assessment in each case is necessary. Every transaction with the intention of having an effect on the way the recipient 27 Gifts and gratuities performs his or her official duties shall be deemed improper. If there is evi- Are certain types of gifts and gratuities permissible under your dence of the recipient performing his or her official duties in a wrongful domestic bribery laws and, if so, what types? way or if there is proof of that being intended, the reward should, again, be deemed improper. If there is no evidence of corrupt intent, the assessment Swedish law does not explicitly provide for any exemptions to the brib- is more difficult to make. An important factor in the assessment is the value ery provisions; instead one must look to all relevant circumstances when of the reward. A reward of an exceptionally low value runs little to no risk determining if a reward is to be deemed improper. of being able to influence the way the recipient performs his or her official duties and is therefore unlikely to be deemed improper. 28 Private commercial bribery Does your country also prohibit private commercial bribery? 23 Prohibitions Yes, as stated in question 2, Swedish law criminalises corrupt acts commit- Does the law prohibit both the paying and receiving of a bribe? ted both within the public and the private sectors. Yes. Giving, promising or offering a bribe or other improper reward is crim- inalised as bribery in chapter 10, section 5(b) of the Penal Code. Receiving, 29 Penalties and enforcement accepting a promise of or demanding a bribe or other improper reward What are the sanctions for individuals and companies violating is criminalised as bribe-taking in Chapter 10, section 5(a) of the Swedish the domestic bribery rules? Penal Code. Both bribery and bribe-taking are, according to the Penal Code, punishable by a fine or imprisonment for two years at the most. If the crime is grave it is punishable by imprisonment for at least six months and for six years at the most. In addition to the criminal sanctions provided for by the provisions on bribery and bribe-taking, an employee guilty of bribe-taking stands the risk of additional sanctions provided for by labour law such as dismissal or
202 Getting the Deal Through – Anti-Corruption Regulation 2015 Advokatfirman Delphi SWEDEN salary reduction. Furthermore, the Penal Code criminalises actions such as types of payments, case law is scarce if non-existent and thus there are no unlawful disposal and breach of faith and breach of duty. known cases solely involving such payments. Accountancy law provides an efficient complement to the provisions on bribery and bribe-taking, as all businesses have a legal duty to be able to 31 Recent decisions and investigations verify all commercial transactions. Identify and summarise recent landmark decisions and The court may also declare illicit payments confiscated to the state investigations involving domestic bribery laws, including any treasury, unless it would be manifestly unreasonable to do so. This includes investigations or decisions involving foreign companies. not only the illicit payment itself, but also estimated economic advantages resulting from the crime. If, for example, a corporation has been able to The number of investigations involving bribery in Sweden each year is secure an advantageous business deal by bribing its counterpart, the actual usually low and the cases brought tend to focus on fairly trivial acts of cor- or estimated profits from that business deal may be confiscated. ruption. This fact may have led people to believe that corrupt acts are rare Bribery offences may also lead to disbarment from public procurement in Sweden. However, this notion is changing and as previously mentioned according to Chapter 10 of the Public Procurement Act. As mentioned, in this chapter Sweden has more work to do in order to reduce corruption an entity with a legal personality cannot be subject to criminal charges. within society. During the past few years the National Anti-Corruption It can, however, under specific circumstances be subject to a fine. If the Unit has been engaged in a number of preliminary investigations, which criminal act of bribery or bribe-taking has been committed in the name of include numerous individuals and corporations, concerning corruption a corporation and a person acting is a high-level employee such as a vice- scandals in Gothenburg. Several cases have been brought to trial and there president or a board member, or if a corporation has failed to do what have been convictions. The investigations and the cases involved acts of could be expected of it to prevent the criminal act, the corporation may be bribery, unlawful disposal and breach of faith, as well as fraud by local subject to a fine in accordance with the Penal Code. The fine may range governmental bodies on the one hand and privately owned construction from 5,000 to 10 million kronor. companies on the other, linked together in public procurement. Two other recent cases handled within the unit concern allegations on bribery within 30 Facilitating payments the Swedish Prison and Probation Service in conjunction with construction Have the domestic bribery laws been enforced with respect to of a new prison and allegations on corruption within the Swedish Migration facilitating or ‘grease’ payments? Board. As regards the allegations on bribery within the Swedish Prison and Probation Service, the district court has now, by a judgment published in As indicated above, Swedish law makes no distinction between facilitat- September 2014, decided to hold all the individuals involved liable for, ing payments as opposed to bribes; also, facilitating or grease payments inter alia, gross bribe-taking and gross bribe-giving. are against the law. However, when it comes to enforcement against these
Olof Rågmark [email protected] Sofia Bruno [email protected]
PO Box 1432 Tel: +46 8 677 54 00 Regeringsgatan 30–32 Fax: +46 8 20 18 84 111 84 Stockholm www.delphi.se Sweden
www.gettingthedealthrough.com 203 SWITZERLAND Lalive
Switzerland
Marc Henzelin and Daniel Lucien Bühr Lalive
1 International anti-corruption conventions In addition to the SCC, active and passive bribery in the private area To which international anti-corruption conventions is your became an offence under article 4a of the Unfair Competition Act (intro- duced on 1 July 2006) but it is a misdemeanour, meaning that Switzerland country a signatory? cannot prosecute acts of money laundering in Switzerland of the proceeds of Switzerland is a signatory to three international anti-corruption private corruption committed abroad, as money laundering in Switzerland conventions. can only be prosecuted for the proceeds of a crime (maximum sentence of Switzerland first ratified the 2003 United Nations Convention against three years at least). Corruption on 10 December 2009, with no reservation. Switzerland is also part of the 1998 Council of Europe Criminal Law Foreign bribery Convention on Corruption and its 2003 Additional Protocol, both ratified on 3 Legal framework 31 March 2006. However, Switzerland made several reservations regarding this convention. In particular, it reserved its right not to apply section 12 of Describe the elements of the law prohibiting bribery of a the convention (trading in influence) – to the extent that this offence is not foreign public official. punishable under Swiss law – as well as its right to apply section 17(1)(b) Bribery of a foreign public official is punished by article 322-septies of the and (c) (applying to extraterritorial jurisdiction) only where an act is also SCC. The application of this provision requires an unlawful payment or an punishable in the country where it was committed and the offender is in advantage (ie, any other measurable improvement in the beneficiary’s sit- Switzerland and will not be extradited to a foreign state. Switzerland is also uation, whether in economic, legal or personal terms) or the offer or prom- a member of the Council of Europe’s Group of States against Corruption. ise of such a payment or advantage in order to cause that official to act in Switzerland is also a party to the 1997 OECD Convention on breach of his or her public duties or to act or take a decision within his dis- Combating Bribery of Foreign Public Officials in International Business cretion. Knowing if the ‘advantage’ given represents an ‘undue advantage’ Transactions, ratified on 31 May 2000, and the United Nations Convention for the foreign official shall be assessed by the terms of the legislation of against Corruption, ratified on 24 September 2009. the country concerned. It is important to specify that a bribe paid to cause a In addition to these conventions, on 31 May 2000, Switzerland has foreign official to act in accordance with his or her public duties (facilitating also ratified the 1990 Council of Europe Convention on Laundering, or ‘grease’ payments) is not punishable under this provision. Search, Seizure and Confiscation of Proceeds of Crime. In particular, this Convention allows for the restraining of assets alleged to be the proceeds 4 Definition of a foreign public official of crime and provides for the confiscation of those assets and the recogni- tion of foreign judgments ordering confiscation. How does your law define a foreign public official? Moreover, Switzerland is a party to a number of bilateral treaties in Under Swiss law, the definition of foreign public officials includes, as required matters of mutual assistance that facilitate the seizure, confiscation and by the OECD’s Convention, the officials of a foreign state or a foreign author- repatriation of proceeds of crimes (which include corruption). ity, the officials of international organisations, regardless of their nationality. The definition of a ‘public official’ under article 322-ter of the SCC also applies 2 Foreign and domestic bribery laws for article 322-septies; it therefore includes all foreigners acting as members Identify and describe your national laws and regulations of a judicial or other authority, public officials, officially appointed experts, prohibiting bribery of foreign public officials (foreign bribery translators or interpreters, arbitrators or members of the armed forces. It is laws) and domestic public officials (domestic bribery laws). important to specify here that private persons performing official duties shall be treated as public officials (article 322-octies of the SCC), including The Swiss Criminal Code (SCC) has five provisions prohibiting acts of when they act for public companies active in the private sector. bribery. The SCC first criminalises the active and passive corruption of 5 Travel and entertainment restrictions domestic officials under articles 322-ter and 322-quater respectively. These provisions prohibit offering, promising or giving an undue advan- To what extent do your anti-bribery laws restrict providing tage (respectively soliciting, receiving a promise of or accepting such an foreign officials with gifts, travel expenses, meals or advantage) to a member of a judicial or other authority, a public official, entertainment? an officially-appointed expert, translator or interpreter, an arbitrator or a Swiss law prohibits offering any ‘undue advantage’ to a public official, member of the armed forces, for that persons’ benefit or for anyone else’s which is any ascertainable enhancement (legal, economical or personal) benefit, in order to cause him or her to carry out or to fail to carry out an in the beneficiary situation. It can take any form in particular; a payment, act in connection with his official activity which is contrary to his duty or (more or less hidden, for example an excessive fee for a service), a ben- dependent on his discretion. efit in kind (for example a gift of a valuable object, including travel), the Furthermore, articles 322-quinquies and 322-sexies of the SCC prohibit promise of a promotion, supporting an election, etc. It must, however, be the granting of an advantage to a public official as well as the acceptance by paid to induce the foreign official to act in breach of his or her public duties public officials of an advantage which is not due to them in order to carry or to exercise his or her discretion in favour of the corrupting party or of a out their official duties (facilitating or ‘grease’ payments). third party. Active and passive corruption of foreign public officials are punished However, advantages are not undue if allowed by staff regulations or if under article 322-septies of the SCC. they are of minor value in conformity with social custom (article 322-octies 2 SCC).
204 Getting the Deal Through – Anti-Corruption Regulation 2015 Lalive SWITZERLAND
enforcement authorities handle all other investigations into bribery and 6 Facilitating payments money-laundering cases. Do the laws and regulations permit facilitating or ‘grease’ 11 Leniency payments? Is there a mechanism for companies to disclose violations in exchange for lesser penalties? Switzerland does not criminalise facilitating or ‘grease’ payments to foreign public officials. Swiss criminal law distinguishes between proper corruption, Companies or individuals can ask for the opening a simplified procedure, which induces public official to breach their duty and granting or accepta- which allows them to negotiate a plea bargain with the Prosecution Service. tion of a benefit, which induces public officials to perform a lawful act that The prerequisite is that the offender agrees on facts, offences and sen- does not depend on their discretionary power (ie, a lawful act). The latter is tences with the Prosecutor and that he recognises (where applicable) the not prohibited by the legislation affecting corruption of foreign public offi- civil claims (article 358 ff SCPC). The plea bargain has to be subsequently cials (article 322-septies SCC) which only prohibits proper corruption. On agreed by a court in a summary trial. the contrary, similar payment to Swiss public officials (as well as receipt of If no solution is found, all documents provided by the companies or payment by those officials) constitute an offence under Swiss criminal law. the individuals within this frame are destroyed and cannot be used within an ordinary criminal procedure and the Prosecutor in charge cannot be the 7 Payments through intermediaries or third parties one who negotiated the plea bargain. In what circumstances do the laws prohibit payments through In a normal criminal proceeding, the company’s conduct in the course of the proceedings can be taken into account by the court in determining intermediaries or third parties to foreign public officials? the appropriate sanction. Swiss criminal law explicitly prohibits payments through ‘third parties’ (article 322-quater SCC) under the following conditions: the public official 12 Dispute resolution is aware of the advantage given to a third party and there is a link between Can enforcement matters be resolved through plea this advantage and a breach of his or her duties by the official. There is no agreements, settlement agreements, prosecutorial discretion requirement that the official obtains an indirect benefit. or similar means without a trial? 8 Individual and corporate liability See under 11 supra. Can both individuals and companies be held liable for bribery Bribery cases may also be resolved: of a foreign official? • by exemption from punishment or abandonment of proceedings if the case is of minor relevance within the meaning of article 52 SCC ; Both individuals and companies can be held liable for bribery of a foreign • by exemption from punishment or abandonment of proceedings if the official. Indeed, in accordance with article 102 (2) CSS, the company can be offender has made reparation for the loss, damage or injury or made convicted irrespective of the criminal liability of natural persons, provided every reasonable effort to right the wrong that he or she has caused the company is responsible for failing to take all the reasonable organisa- provided that the interests of the general public and, where applica- tional measures that were required in order to prevent such an offence. ble, of the persons harmed, in the prosecution are negligible (article 53 SCC); 9 Civil and criminal enforcement • by way of summary penalty order, which is a procedure without a trial. Is there civil and criminal enforcement of your country’s This procedure is workable only if the offender accepts liability for the offence or if his or her responsibility has otherwise been satisfactorily foreign bribery laws? established (article 352 ff SCPC) and if sentences provided are appro- According to criminal law, Switzerland does not enforce foreign bribery priate in the case (a monetary penalty of no more than 180 daily pen- laws but it can accept the delegation of prosecution by foreign states (article alty units; community service of no more than 720 hours; a custodial 85 Law on Mutual Legal Assistance). Swiss law pursues anyone that com- sentence of no more than six months) ; mitted a corruption offence abroad if the act is also liable to prosecution at the place of commission or no criminal law jurisdiction applies at the place 13 Patterns in enforcement of commission; and if the person concerned remains in Switzerland and is Describe any recent shifts in the patterns of enforcement of the not extradited to the foreign country (article 7 (1) SCC). Furthermore, the foreign bribery rules. Federal Act on International Mutual Assistance in Criminal Matters, pro- vides that a state may obtain urgent interim relief prior to the transmission Between 2000 and 2006, Switzerland extended and tightened its brib- to Switzerland of a formal request for mutual assistance, provided that it ery rules. Switzerland also substantially contributed to the drafting of announces its intent to forward such a request (article 18 IMAC). the OECD Convention of 1997 on Combating Bribery of Foreign Public According to civil law, a foreign judgment will be recognised and Officials in International Business Transactions. enforced if the conditions of the Swiss Private International Law Act are For many years, Switzerland was keen on freezing and spontaneously fulfilled (article 25-ss PILA). Furthermore, the PILA provides that the law returning assets belonging to former heads of States or politicians, in of the market where the effects of the unfair act occurred (article 136 PILA) particular after the Arab Spring. determines the law applicable to the claims. Switzerland was also particularly active in fighting money laundering in its territory, including in seizing and confiscating the proceeds of brib- 10 Agency enforcement ery. For this purpose, Switzerland is using a system of suspicious activities What government agencies enforce the foreign bribery laws reports by banks and spontaneous assistance by prosecutors to foreign States once money obtained illegally or by improper means is discovered and regulations? in Switzerland. In matters of international cooperation, the central authority appointed At the end of 2014, the Swiss parliament toughened its rules against in Switzerland, in accordance with article 29 of the Council of Europe money laundering. This sends an important signal to corporate Switzerland Corruption Treaty, is the Federal Office of Justice (FOJ), an agency of the that foreign bribery is considered a serious offence under Swiss law and Federal Department of Justice and Police. The FOJ is the central author- would be henceforth penalised. ity that cooperates with national and international authorities in matters involving legal assistance and extradition. 14 Prosecution of foreign companies With regards to domestic criminal investigations, bribery and In what circumstances can foreign companies be prosecuted money laundering cases generally fall within the jurisdiction of the Swiss for foreign bribery? Confederation and are conducted by the Office of the (federal) Attorney General if the offence has been committed mainly in a foreign country or in Under Swiss law, the defective organisation of the company to take all the several cantons with none of them being clearly predominant (article 24(1) reasonable organisational measures that were required in order to prevent of the Swiss Criminal Procedure Code (SCPC)). The relevant cantonal law bribery, is a necessary requirement for establishing corporate criminal liability. A foreign company is subject to criminal prosecution in the place www.gettingthedealthrough.com 205 SWITZERLAND Lalive where the acts of bribery were committed or where the defective organisa- in accordance with the provisions of articles 957 et seq of the Code of tion of the company occurred, for example, in a branch of the company. Obligations. The accounting principles and requirements are complete, Unlawful payment via Swiss bank accounts could establish corporate truthful and systematic recording of transactions and circumstances, doc- criminal liability. umentary proof for individual accounting procedures, clarity, fitness for purpose given the form and size of the undertaking and verifiability of the 15 Sanctions financial information. What are the sanctions for individuals and companies violating The accepted accounting standards are IFRS, IFRS for SMEs, Swiss GAAP FER, US GAAP and IPSAS (the latter for public sector entities). In the foreign bribery rules? regulated sectors such as financial services, special rules apply. Any person who offers a bribe to a foreign public official to obtain an advan- Effective internal controls are explicitly and implicitly required by tage which is not due to him is liable to a custodial sentence not exceeding a number of statutes. The most important is article 716a of the Code of five years or to a monetary penalty up to 1 million Swiss francs, or both. The Obligations which states that the Board of Directors of a Swiss stock sanction may include prohibition from practising a profession (article 67 corporation bears (among others) responsibility for the organisation of SCC), publication of the judgment (article 68 SCC), and expulsion from the accounting, for financial control and financial planning systems as Switzerland for foreigners as an administrative sanction (article 62(b) and required for the management of the company and must supervise the per- article 63(1)(a) of the Federal Act on Foreign Nationals). The court shall sons entrusted with managing the company, in particular with regard to order the forfeiture of those assets which have been acquired through the compliance with the law and internal directives. commission of an offence (article 70 SCC). Articles 727 et seq of the Code of Obligations on external auditors A company that has not taken all the reasonable and necessary pre- apply to all enterprises regardless of their legal organisation and state a cautions to prevent bribery within its internal organisation is penalised general duty to appoint external auditors. However, the scope of the exter- irrespective of the criminal liability of any natural persons and is liable to nal audit depends on the type (publicly traded versus private) and size of a fine not exceeding 5 million francs (article 102 SCC). the enterprise. The auditors must examine whether: • the annual (consolidated) accounts comply with the statutory pro- 16 Recent decisions and investigations visions, the articles of association and the chosen set of financial reporting standards; Identify and summarise recent landmark decisions or • the motion made by the board of directors to the general meeting on investigations involving foreign bribery. the allocation of the balance sheet profit complies with the statutory In 2014, dozens of corruption cases were running in foreign corruption provisions and the articles of association; and cases, in particular several important cases related to Greece, Kenya, • there is an internal control system. Kazakhstan, Ukraine, Uzbekistan. In April 2014, the Office of the Attorney General of Switzerland opened criminal investigations into money laun- 18 Disclosure of violations or irregularities dering in the context of the corruption scandal concerning the Brazilian oil To what extent must companies disclose violations of company Petrobras. A request for mutual assistance was sent to Brazil. The anti-bribery laws or associated accounting irregularities? investigations are still ongoing. Concerning amendments to current Swiss law, the Parliament is work- A statutory reporting duty regarding violations of anti-bribery laws and ing on a more efficient way to punish the persons working in international related accounting irregularities does not exist under Swiss law. General sports organisations (more than 50 per cent of these have chosen to locate reporting duties regarding legal or compliance, reputational and opera- their headquarters in Switzerland). This amendment will consist in the tional risks do, however exist in regulated sectors, such as the financial modification of article 4a of the Unfair Competition Act. Nowadays, this services sector. In addition, under the Federal Act on Combating Money provision only allows criminal authorities to prosecute an individual for Laundering and Terrorist Financing in the Financial Sector, financial inter- private bribery when a complaint has been filed. The new provision will mediaries must notify the authorities if they suspect money-laundering allow the authorities to introduce automatic prosecutions when a case of activities. private bribery occurs without such complaint. Furthermore, the Money Should the external auditors find that there have been infringements Laundering Act will be amended to qualify senior civil servants of inter- of the law, they must give notice to the board of directors in writing and national sports bodies in Switzerland as ‘politically exposed persons’. This inform of any material infringements at the general shareholders’ meeting. new status will permit Swiss authorities to keep a wary eye on them and their finances will be scrutinised. 19 Prosecution under financial record keeping legislation A recent judgment of the Federal Court of 16 May 2014 should, Are such laws used to prosecute domestic or foreign bribery? according to Michael Lauber, Attorney General of Switzerland, facilitate the cooperation between Swiss judicial authorities and their foreign coun- The violation of bookkeeping laws is a criminal offence (article 251 of terparts. In its decision No. 1C_126/2014, the Federal Court held that Swiss the Swiss Criminal Code – falsification of documents) and a violation of authorities could forward information outside of a formal mutual assis- ancillary provisions aimed at ensuring proper bookkeeping. The violation tance procedure, even though they did not open a criminal investigation of bookkeeping duties may trigger administrative sanctions in regulated themselves. In fact, before this decision, a part of the legal doctrine con- industries, such as financial services. sidered that the spontaneous provision of information necessarily implies that an investigation has previously been opened in Switzerland. Thus, this 20 Sanctions for accounting violations doctrine generally believes that this new case law ‘goes too far’. However, What are the sanctions for violations of the accounting rules it has to be specified that the spontaneous exchange of information with associated with the payment of bribes? foreign countries is limited to information which is not covered by a legally protected secret, such as bank secrecy. This new decision of the Federal The falsification of documents in the sense of article 251 of the Swiss Court may accelerate the exchange of information in cases of international Criminal Code may result in imprisonment for up to five years and/or a corruption, where the formal procedure of mutual assistance is generally fine of up to 1 million Swiss francs. too long to be effective. 21 Tax-deductibility of domestic or foreign bribes Financial record keeping Do your country’s tax laws prohibit the deductibility of 17 Laws and regulations domestic or foreign bribes? What legal rules require accurate corporate books and records, Switzerland’s federal and cantonal tax laws explicitly exclude tax deduct- effective internal company controls, periodic financial ibility of bribes paid to domestic or foreign public officials. Bribes paid to statements or external auditing? private persons are tax-deductible. All legal entities and all sole proprietorships and partnerships that have achieved sales revenues of at least 500,000 Swiss francs in the past financial year are obliged to keep accounts and file financial reports
206 Getting the Deal Through – Anti-Corruption Regulation 2015 Lalive SWITZERLAND
Domestic bribery may qualify as public officials, if and to the extent they pursue an official activity. 22 Legal framework Describe the individual elements of the law prohibiting bribery 25 Public official participation in commercial activities of a domestic public official. Can a public official participate in commercial activities while Articles 322-ter et seq of the Swiss Criminal Code prohibit bribery of serving as a public official? domestic public officials. The elements of (active) bribery of domestic Yes, to the extent that the participation is financial only and does not create public officials are: a conflict of interests. No, or within narrow limits, if the participation in commercial activities involves employment of labour. (i) a person offers, promises or gives an undue advantage (ii) to a member of a judicial or other authority, a public official, an -offi 26 Travel and entertainment cially appointed expert, translator or interpreter, an arbitrator, or a member of the armed forces or to a third party, Describe any restrictions on providing domestic officials (iii) in order to cause that public official to carry out or to fail to carry out with gifts, travel expenses, meals or entertainment. Do the an act in connection with his official activity which is contrary to his restrictions apply to both the providing and receiving of duty or dependent on his discretion. such benefits?
Minor advantages that are common social practice do not qualify as undue According to article 322-octies of the Criminal Code, minor and commonly advantages. accepted social advantages and which are authorised by administrative According to article 322-quinquies of the Criminal Code, the elements regulations are licit. Under the Ordinance on Federal Employees and the of the (lesser) offence of granting an undue (‘facilitating’) advantage to a guidance of the Federal Office of Personnel regarding prevention of cor- domestic public official are: ruption, staff members of the Federal Administration may not accept gifts in the course of their work, unless they are small in nature (valued no more (i) a person offers, promises or gives than 200 Swiss francs) and are socially or traditionally motivated. During (ii) to a member of a judicial or other authority, a public official, an procurement or decision-making processes, even small and socially or officially-appointed expert, translator or interpreter, an arbitra- traditionally motivated benefits are not permitted. tor or a member of the armed forces (iii) an advantage which is not due to him in order that he carries out his 27 Gifts and gratuities official duties. Are certain types of gifts and gratuities permissible under your domestic bribery laws and, if so, what types? All criminal offences, including the offence of bribery of a Swiss public official, require mens rea, namely, either intent or wilful blindness (dolus Yes (see answer above). Giving a chocolate box worth 50 Swiss francs or eventualis). US$50 to a public official for his or her speech at a public seminar would be a commonly accepted social practice. However, meals at expensive res- 23 Prohibitions taurants or any kind of entertainment are not commonly accepted social practice and may qualify as bribery or the granting of an undue advantage Does the law prohibit both the paying and receiving of a bribe? (ie, the illicit granting of a facilitation payment). Both active and passive bribery and granting of undue advantages to domestic public officials are prohibited by the Criminal Code and are 28 Private commercial bribery subject to the same level of fines. Does your country also prohibit private commercial bribery?
24 Public officials Under article 4a of the Unfair Competition Act, active and passive bribery in the private sector (private bribery) constitute a criminal offence. The ele- How does your law define a public official and does that ments of (active) private bribery are that: definition include employees of state-owned or state- controlled companies? (i) a person offers, promises or gives (ii) to a private sector employee, a shareholder, an agent or to a third The law defines public officials as members of an authority who pursue an party, official activity. Employees of state-owned or state-controlled companies
Marc Henzelin Daniel Lucien Bühr [email protected] [email protected]
Rue de la Mairie 35 Stampfenbachplatz 4 PO Box 6569 PO Box 212 1211 Geneva 6 8042 Zurich Switzerland Switzerland Tel: +41 58 105 2000 Tel: +41 58 105 2100 Fax: +41 58 105 2060 Fax: +41 58 105 2160 www.lalive.ch
www.gettingthedealthrough.com 207 SWITZERLAND Lalive
30 Facilitating payments Update and trends Have the domestic bribery laws been enforced with respect to On 30 April 2014, the Federal Council submitted its legislative facilitating or ‘grease’ payments? project regarding an intensification of the fight against private commercial bribery to Parliament. The Federal Council proposes Yes. In about a dozen instances, courts have sentenced individuals for that private commercial bribery become a criminal offence and be granting or accepting undue advantages. In a recent case involving the prosecuted ex officio. Federal Administration, the Office of the Attorney General on 16 April 2014 The main reason for the proposed changes are that Switzerland opened an investigation against a public official for accepting bribes and is host to a number of international sports associations and a undue advantages. platform for major economic and financial interests and that to date, as a result of the requirement of a criminal complaint by a 31 Recent decisions and investigations competitor, no single conviction has occurred. In future, private commercial bribery shall be an ex officio Identify and summarise recent landmark decisions and criminal offense because, according to the Federal Council, the investigations involving domestic bribery laws, including any prosecution of private commercial bribery is a matter of public investigations or decisions involving foreign companies. interest. According to the proposal, the offence of granting or accepting On 16 April 2014, the Office of the Attorney General began prosecuting a an undue advantage shall be extended to advantages granted to or federal public official for passive bribery and acceptance of undue advan- accepted by third parties. tages. This federal investigation has led to a number of administrative investigations at federal and cantonal level into IT procurement practices and possible other cases of supposed bribery and undue advantages. (iii) an undue advantage in order to cause that private sector person to On 27 August 2014, the Supreme Court of the Canton of Zurich con- carry out or to fail to carry out an act in connection with his employ- firmed a six-year prison sentence for passive bribery against the former ment or business activity which is contrary to his or her duty or head of asset management of the public servants’ pension fund of the dependent on his or her discretion. Canton of Zurich as well as sentences for active bribery against financial advisers. The case relates to the 20 billion Swiss francs pension fund of Private bribery is prosecuted upon demand of a competitor. the public servants of the Canton of Zurich, formerly managed by a pub- lic official of the Canton of Zurich, who, according to the Supreme Court 29 Penalties and enforcement of the Canton of Zurich, accepted bribes and undue advantages in an amount of around 1 million Swiss francs. What are the sanctions for individuals and companies violating On 1 September 2014, the Office of the Attorney General confirmed its the domestic bribery rules? intention to indict a current as well as a former senior Gazprom employee The bribery sanctions for individuals are imprisonment for up to five years for passive bribery and two individuals for active bribery. The case con- and/or a monetary fine of up to 1.08 million Swiss francs. Other criminal cerns the construction of the Yamal pipeline from Siberia to Germany and and administrative law measures are prohibition from practising a profes- the procurement of turbines. Allegedly, bribes were paid by companies in sion, forfeiture of assets that have been acquired through the commission Cyprus from their Swiss bank accounts. of an offence and expulsion from Switzerland for foreigners. On 18 November 2014, the International Federation of Football Under article 102 of the Criminal Code, companies are responsible for Associations (FIFA), filed a criminal complaint with the Office of the failing to take all reasonable organisational measures required in order to Attorney General, submitting to the Office the report of the investigatory prevent bribery (and certain other criminal offences) by its directors and chamber of the FIFA Ethics Committee together with a criminal (bribery) employees. Companies can be fined up to 5 million Swiss francs. As a rule, complaint. The Office of the Attorney General expressed its intention to illicit profits are forfeited. inform the public in due time about further steps.
208 Getting the Deal Through – Anti-Corruption Regulation 2015 ELIG, Attorneys-at-Law TURKEY
Turkey
Gönenç Gürkaynak and Ç Olgu Kama ELIG, Attorneys-at-Law
1 International anti-corruption conventions Foreign bribery To which international anti-corruption conventions is your 3 Legal framework country a signatory? Describe the elements of the law prohibiting bribery of a Turkey is a signatory to or has ratified the following European and interna- foreign public official. tional anti-corruption conventions. Prior to 2003, bribing foreign public officials was not considered a crime in Turkish law. In 2003, Turkish Criminal Code No. 765 (the former Criminal Council of Europe Code) was amended so that offering, promising or giving advantages to • Council of Europe Criminal Law Convention on Corruption of 27 foreign public officials or officials who perform a duty of an international January 1999 (signed 27 September 2001; ratified 29 March 2004); nature, in order that the official ‘act or refrain from acting or to obtain or • Council of Europe Civil Law Convention on Corruption of 4 November retain business in the conduct of international business’ was also consid- 1999 (signed 27 September 2001; ratified 17 September 2003); and ered bribery (Law No. 4782 on Amending Certain Laws for Combating • Council of Europe Convention on Laundering, Search, Seizure and Bribery of Foreign Public Officials in International Business Transactions). Confiscation of the Proceeds from Crime and on the Financing of The provision regulating bribery in the Criminal Code (article 252) was Terrorism of 8 November 1990 (signed 28 March 2007). amended in July 2012 so as to broaden the scope of this amendment. The provision now provides that bribery is committed if a benefit is provided, International offered or promised directly or via intermediaries, or if the respective indi- • OECD Convention on Combating Bribery of Foreign Public Officials viduals request or accept such benefit directly or via intermediaries (both in International Business Transactions, 17 December 1997 (including of which would be in relation to the execution of that individual’s duty to OECD Recommendation for Further Combating Bribery of Foreign perform or not to perform) (article 252(9), Criminal Code): Public Officials in International Business Transactions) (signed 17 • in order to obtain or preserve a task or an illegal benefit due to inter- December 1997; ratified 26 July 2000); national commercial transactions to public officials who have been • the United Nations Convention against Transnational Organized elected or appointed in a foreign country; Crime, 15 November 2000 (signed 13 December 2000; ratified 25 • judges, jury members or other officials who work at international or March 2003); and supranational courts or foreign state courts; • the United Nations Convention against Corruption, 31 October 2003 • members of the international or supranational parliaments; individu- (signed 10 December 2003; ratified 9 November 2006). als who carry out a public duty for a foreign country, including public institutions or public enterprises; In addition to multilateral treaties, Turkey has also been a member of the • a citizen or foreign arbitrators who have been entrusted with a task Group of States against Corruption (GRECO) since 1 January 2004, the within the arbitration procedure resorted to in order to resolve a legal Financial Action Task Force since 1991 and the OECD Working Group on dispute; and Bribery. • officials or representatives working at international or supranational organisations that have been established based on an international 2 Foreign and domestic bribery laws agreement. Identify and describe your national laws and regulations prohibiting bribery of foreign public officials (foreign bribery If bribery of foreign public officials is committed abroad by a foreigner, and laws) and domestic public officials (domestic bribery laws). if this type of bribery is committed in order to perform or not to perform an activity in relation to a dispute to which Turkey, a public institution in The main legislation applying to acts of corruption is the Turkish Criminal Turkey, a private legal person incorporated pursuant to Turkish laws or a Code No. 5237 (the Criminal Code), which entered into force on 1 June Turkish citizen is a party to, or in relation to an authority or individuals, 2005 and which prohibits bribery, malversation, malfeasance, embezzle- then an ex officio investigation and prosecution will be conducted into ment and other forms of corruption such as negligence of supervisory duty, those individuals: unauthorised disclosure of office secrets, fraudulent schemes to obtain ille- • who provide, offer or promise to bribe; gal benefits, etc. • who accept, request, or agree to the offer or promise for the bribe; Apart from the Criminal Code, the core statutory basis of Turkish • who mediate such; and anti-corruption legislation can briefly be summarised and categorised as • to whom a benefit is provided due to this relationship. follows: • Turkish Criminal Procedure Law No. 5271; This is contingent on these individuals being present in Turkey (article • Law No. 657 on Public Officers; 252(10), Criminal Code). • Law No. 3628 on Declaration of Property and Fight Against Bribery Additionally, Law No. 4782 on Amending Certain Laws for Combating and Corruption; Bribery of Foreign Public Officials in International Business Transactions • Regulation No. 90/748 on Declaration of Property (Regulation No. (Law No. 4782), which was enacted on 2 January 2003, provides that: 90/748); and • to offer, promise or give any of the advantages stated in paragraph 1 • the Regulation on Ethical Principles for Public Officers and Procedures above, whether directly or through intermediaries, to the selected and Principles for Application (published in the Official Gazette No. or appointed officials or officers of the foreign public authorities and 25785 of 13 April 2005) (the Regulation on Ethical Principles). institutions that perform a legislative or administrative or judicial www.gettingthedealthrough.com 209 TURKEY ELIG, Attorneys-at-Law
duty, or the officials who perform a duty of an international nature, in is involved in committing), companies can be subject to certain security order that such official or officer act or refrain from acting or to obtain measures, as described in detail in question 14. On the other hand, Law No. or retain business in the conduct of international business shall also 5326 on Misdemeanours (Law No. 5326) also regulates criminal liability of constitute the crime of bribery. legal persons that arises from the behaviour of anybody or representative in case of a misdemeanour, which is defined as unfairness as a result of While this law amended provisions that were stipulated in the former which a legal administrative sanction is imposed on the perpetrator (arti- Turkish Criminal Code, which was abrogated with the enactment of the cle 2, Law No. 5326). Pursuant to article 8 of Law No. 5326, in order for a current applicable Criminal Code (Law No. 5252 on the Enforcement and legal person to be liable for another person’s behaviour, the natural person Application Method of the Turkish Criminal Code) that makes it clear who commits an act that constitutes a misdemeanour as per Law No. 5326 under article 3(1) that any reference that is made in the legislation to the must be a representative of the respective legal person, or must undertake provisions of the former Turkish Criminal Code that were abrogated are to perform an act within the field of operations of the legal person. In such a deemed to have been made to the corresponding provisions in the Criminal case, the legal person may be subject to an administrative sanction, as well Code. Accordingly, prior to the foregoing amendment that was introduced as the natural person who commits the misdemeanour (the natural person with Law No. 4782, bribing foreign public officials was not considered a who commits the misdemeanour and the legal person will be sanctioned crime in Turkish law. separately). Article 43/A of Law No. 5326 specifically states that an administrative 4 Definition of a foreign public official fine of between 14,969 and 2,994,337 Turkish lira may be imposed upon How does your law define a foreign public official? the legal person if a natural person, who is not a representative of a legal person, but who has undertaken a task that falls within the field of opera- What must be understood by ‘foreign public officials’ is: ‘officials or offic- tions of the legal person, commits, inter alia, bribery, as per article 252 of ers of a public authority or a public institution that carry out legislative or the Criminal Code, for the benefit of the legal person. administrative or judicial work and who have been elected or appointed in Individual liability under the Criminal Code is subject to the general a foreign country’. Similarly, those who conduct business that is of an inter- principle of the individuality of the penalties under Turkish law (article 20, national nature in a foreign country are also deemed to be ‘foreign public Criminal Code). This means that the sanctions that are applicable to natu- officials’. The fact that these persons have been provided with a material ral persons under the Turkish criminal law framework can only be imposed benefit due to international commercial transactions for doing or not doing on individuals who have committed the crime, and not to anyone else a job or in order to obtain an unjust benefit or retain such benefit is also (including the company who may be the employer of an employee commit- considered to constitute bribery. In this respect, bribery is considered to ting a crime). While lacking criminal capacity, legal persons, as per article have been committed when a material benefit or a promise is provided or 20(2), may be subject to security measures (article 60, Criminal Code). made to a ‘foreign public official’ as a result of ‘international commercial transactions’. 9 Civil and criminal enforcement Is there civil and criminal enforcement of your country’s 5 Travel and entertainment restrictions foreign bribery laws? To what extent do your anti-bribery laws restrict providing foreign officials with gifts, travel expenses, meals or Turkish laws that regulate bribery are subject to criminal enforcement, as the primary legislation regulating bribery (more specifically foreign brib- entertainment? ery) is the Criminal Code. Hence, civil enforcement is not observed in the Article 252 of the Criminal Code not only penalises the public official who Turkish legal framework for bribery and corruption. receives a bribe (which could be in the form of gifts, travel expenses, meals or entertainment), but it also sanctions the individual who gives a bribe, 10 Agency enforcement irrespective of whether there is actually an agreement between them to What government agencies enforce the foreign bribery laws enter into a bribe (article 252 (4), Criminal Code). and regulations? 6 Facilitating payments There is no particular government agency that is responsible for enforcing Do the laws and regulations permit facilitating or ‘grease’ foreign bribery laws in Turkey. The judiciary has full powers to apply the provisions stipulated under the relevant laws, as described in question 2, in payments? relation to bribery and corruption. Unlike the anti-bribery provisions of the US Foreign Corrupt Practices Act, the relevant provisions of the Criminal Code clearly dictate the provisions 11 Leniency of bribery and do not provide any exceptions regarding the facilitating Is there a mechanism for companies to disclose violations in payments. Facilitating payments, or grease payments, would constitute a exchange for lesser penalties? crime in Turkey, even if they were to be done the way that is regulated as an exception under the US Foreign Corrupt Practices Act. To that end, com- Pursuant to the Criminal Code, a person who gives or receives a bribe, but pliance officers and in-house counsel would be well advised to hesitate in then informs the investigating authorities about the bribe before the ini- recognising a facilitating payment exception in Turkey. tiation of an investigation, shall not be punished for the crime of bribery (article 254(1) and article 254(2)). However, this rule shall not be applicable 7 Payments through intermediaries or third parties to the person who gives a bribe to foreign public officials (article 254(4)). In what circumstances do the laws prohibit payments through 12 Dispute resolution intermediaries or third parties to foreign public officials? Can enforcement matters be resolved through plea As of July 2012, the Criminal Code sanctions an individual who acts as agreements, settlement agreements, prosecutorial discretion an intermediary for conveying the offer or the request to bribe to another or similar means without a trial? party for accommodating the bribery agreement or for providing bribery (article 252 (5), Criminal Code). Turkish criminal enforcement does not allow for any dispute resolution mechanism other than through a litigious approach. 8 Individual and corporate liability Can both individuals and companies be held liable for bribery 13 Patterns in enforcement of a foreign official? Describe any recent shifts in the patterns of enforcement of the foreign bribery rules. While the Criminal Code allows for penalties to be sanctioned on real persons who commit a crime or are engaged in the committing of any Not applicable. such crime (ie, the Criminal Code does not stipulate that a company, hav- ing a legal personality, is to be the subject of penalties for crimes that it
210 Getting the Deal Through – Anti-Corruption Regulation 2015 ELIG, Attorneys-at-Law TURKEY
14 Prosecution of foreign companies 16 Recent decisions and investigations In what circumstances can foreign companies be prosecuted Identify and summarise recent landmark decisions or for foreign bribery? investigations involving foreign bribery. The general principle under Turkish criminal law is that penal sanctions The following is an account of recent foreign bribery cases and cannot be imposed on legal entities (article 20 of the Turkish Criminal investigations: Law), save for the analyses provided under question 8. In other words, the Turkcell’s board of directors initiated internal investigations on allega- provisions of the Turkish Criminal Code are applicable to legal persons tions of bribery in Kazakhstan by its subsidiary KCell and the subsidiary’s who have committed a crime as stipulated under the Criminal Code in the supplier, Swedish company Ericsson. Republic of Turkey. In December 2010, the German media reported allegations that the If a bribe creates an unlawful benefit to a legal entity, the entity shall German state-owned HSH Nordbank made payments to Turkish judges in be punished through three measures: invalidation of the licence granted by 2009 to influence an action for damages filed against it by a Turkish com- a public authority; seizure of the goods which are used in the commitment pany. According to reports, the bribes allegedly were paid via the German of, or the result of, a crime by the representatives of a legal entity; and sei- security company Prevent. These allegations reportedly resulted from an zure of pecuniary benefits arising from or provided for the commitment of audit carried out by KPMG. a crime (article 253). Siemens AG and its Turkish subsidiary Siemens Sanayi ve Ticaret AS The principle of territoriality, hence, is a natural outcome of the appli- paid a fine of US$800 million to the SEC and the American Ministry of cability of sanctions under the Turkish Criminal Law regime. The Criminal Justice and €395 million to the German Ministry of Justice for the bribes Code has adopted the principle of the place where the crime is committed given in order to win international tenders in December 2008. These two when determining whether a crime has been committed in Turkey, and companies have also been the subject of another investigation which was hence, whether the Turkish Criminal Code is applicable. According to this opened in early 2011 by the Turkish Prime Ministry Inspection Board. The principle, if the behaviour and the result that constitute the material ele- Under-Secretariat of Foreign Trade has also reportedly initiated an investi- ments of a crime are realised in Turkey, the crime is deemed to have been gation into the matter, which has turned into a prosecution. committed in Turkey (article 8(1) of the Criminal Code). Consequently, Daimler AG, the manufacturer of Mercedes, paid a fine of US$93.6 foreign companies (where they are subject to the above measures) and million to the Ministry of Justice and US$91.4 million to the SEC for the their legal personal representatives will be subject to the provisions of the bribes made by its subsidiaries in China, Croatia, Egypt, Greece, Hungary, Criminal Code only in the event that they commit a crime in the Republic Indonesia, Iraq, Ivory Coast, Latvia, Montenegro, Nigeria, Russia, Serbia, of Turkey. Thailand, Turkey, Turkmenistan, Uzbekistan and Vietnam in April 2010.
15 Sanctions Financial record keeping What are the sanctions for individuals and companies violating 17 Laws and regulations the foreign bribery rules? What legal rules require accurate corporate books and records, As per the Turkish criminal law regime, only acts that are committed in effective internal company controls, periodic financial Turkey or that are deemed to have been committed in Turkey, as described statements or external auditing? in question 14, are subject to sanctioning. Therefore acts that are punish- able as per the principle of territoriality regime, that are committed by As a general rule, the Turkish Tax Procedure Law No. 213 requires taxpay- individuals and companies and that would constitute a crime pursuant to ers to keep documentation for a period of five years after the end of the domestic bribery rules (ie, the Turkish Criminal Code) will also be subject financial year to which the documentation relates (article 253). to certain sanctions. Additionally, article 82(5) of the Turkish Commercial Code requires The penalties for acts of corruption under the Turkish Criminal Code from those persons who are obliged to keep books and their successors or can be summarised as follows: representatives to keep their books for a period of 10 years after their last Fraud is punished by (article 157, Criminal Code) one to five years’ entry and to keep other accounts and documentation, which must be kept, imprisonment and up to 5,000 days of judicial monetary fine. Qualified for a period of 10 years as of their respective dates. fraud is punished by (article 158, Criminal Code) two to seven years’ However, a distinction can be made regarding the rules applicable imprisonment and up to 5,000 days of judicial monetary fine. The judi- to publicly traded companies and non-public companies. Publicly traded cial monetary fine can vary between 20 and 100 Turkish lira. The judge companies are required to keep their corporate books and financial records determines the rate of the fine depending on the individual’s economic and in accordance with the provisions set out in Communiqué on Financial other personal status. Generally, penalties for fraud can only be imposed Reporting in Capital Markets (Series No. II, 14.1). According to article 7 on natural persons, as companies, as legal entities, do not attract criminal of Communiqué Series No. II, 14.1, publicly traded companies are obliged liability (article 20, Criminal Code). to keep interim financial statement and income statement on a quarterly Bribery (articles 252 et seq) warrants imprisonment of four to 12 years basis. As per article 14 of Communiqué Series No. II, 14.1, publicly traded for the incumbent government official and bribe-giver, and appropriate companies are also obliged to publish their annual and interim financial measures (such as confiscation of property, cancellation of licences, etc) reports on their websites, once these are publicly announced. against legal entities benefiting from bribery, subject to attenuating and As per Law No. 6102, joint-stock companies subject to independent audit- aggravating circumstances as set forth in the Criminal Code. In addition ing will be required to set up and maintain a company website (for new to the foregoing, the length of potential imprisonment can be increased by companies, within three months of their incorporation), and must allo- one-third to one-half if the individual who receives a bribe or offers bribe cate a part of the website to required legal announcements. According or agrees to act as such conducts judicial duty, or is an arbitrator, expert, to article 5 of the Regulation on Company Websites (the Regulation), the notary public, or sworn financial consultant (article 252(7), Criminal Code). companies which are subject to audit as per article 397 of Law No. 6102 Malversation (articles 250 et seq) warrants imprisonment from five to have to establish websites within three months of being registered with the ten years for the defendant government official, subject to attenuating and trade registry. The companies that have become subject to the said audit aggravating circumstances as set forth in the Criminal Code. after the effective date of the Regulation must establish a website within Depending on the form of the specific act, malfeasance (articles 255, three months. According to provisional article 1 of the Regulation, com- 257, 259, 260, 261 et seq) may warrant various penalties against the defend- panies incorporated before 1 July 2013 must establish a website within ant government official. three months, starting from 1 July 2013. The authorised bodies of compa- Embezzlement (articles 247 et seq) warrants imprisonment from five nies who do not publish their websites within three months of incorpora- to twelve years for the defendant government official, subject to attenuat- tion will be subject to a judicial fine of between 20 and 100 Turkish lira ing and aggravating circumstances as set forth in the Criminal Code. per day, depending on the court’s discretion, for between 100 and 300 days. Therefore, the amount of the judicial fine will be between 2,000 and 30,000 Turkish lira by taking into account the minimum and maximum wage. Authorised bodies of companies who do not include the requisite information on their websites for the information society to have access to will be subject to a judicial fine of up to 100 days. www.gettingthedealthrough.com 211 TURKEY ELIG, Attorneys-at-Law
Equity companies under Turkish law, are primarily subject to the 19 Prosecution under financial record keeping legislation provisions of the Turkish Commercial Code in terms of maintaining their Are such laws used to prosecute domestic or foreign bribery? financial records and books. As a general rule, article 225 of the Turkish Commercial Code provides that each shareholder of a company has the All the rules and legislation described above under article 17 and article 18 right to request the auditing (internal auditing) of the company records and shall be applied to each company’s record and bookkeeping. A company’s books, as well as requesting information on the actions of the respective failure to perform its obligations under the relevant legislation would lead company. An agreement to the contrary is regarded as void. to the company and its directors being liable towards the authorities, if they On a more specific note, article 210 of the Turkish Commercial carry indications of domestic or foreign bribery. Code stipulates that commercial auditors of the Ministry of Customs and Commerce audits joint-stock companies. As for limited liability compa- 20 Sanctions for accounting violations nies, article 635 provides that the same provisions that apply to joint-stock What are the sanctions for violations of the accounting rules companies now also apply to limited liability companies. What is perhaps associated with the payment of bribes? one of the most striking changes brought about with Law No. 6102 is the new regime on the auditing of equity capital companies (particularly joint- Article 341 of the Turkish Tax Procedure Law No. 213 defines what must stock companies, limited liability companies and groups of companies). be understood from loss of tax, although the definition does not distin- This is a welcome change that, in essence, mirrors the regulations already guish between losses of tax as a result of bribery, be it domestic or foreign. observed in the US and EU. An audit of the separate or consolidated finan- Accordingly, loss of tax is when tax is not computed on time or is computed cial statements of the company is based on the company’s accounting incompletely, as a result of the inability to fulfil or incompletely fulfil the records (eg, its books, records and documents). Because the auditor must relevant taxation duties borne by the taxpayer or the responsible individ- receive information from the relevant individuals regarding this data, Law ual. In this regard, article 343 sets out the minimum penalty for committing No. 6102 grants the auditor the right to access comprehensive information a loss of tax as no less than 8 Turkish lira for each document, bond and bill. in order to be able to completely and correctly understand the data to be Article 112(2) of the Capital Markets Law No. 6362 stipulates that the audited. The board of directors’ obligation of corporate governance disclo- persons who intentionally prepare financial tables and reports that do not sure is in essence one of the non-delegable duties and powers stipulated reflect the truth, falsely open an account, conduct any types of accounting under article 375 of Law No. 6102. If such information is not disclosed, the fraud or who prepare false or misleading independent auditing and evalu- board of directors may be held responsible, which is limited to the com- ation reports or the responsible board of directors members or responsible pany, the respective company employees and the company’s business and managers for issuers who allow for these to be prepared may be punished operations. The right to request the disclosure of such material and infor- according to the Criminal Code. The first paragraph of the same article mation goes hand in hand with ‘disclaimer of opinion’ stated under article also provides that the persons who intentionally keep books and records as 403(4) of Law No. 6102. If the board of directors refuses disclosure of such required by the law irregularly, or not within the time periods stipulated by information and material, this can lead to a disclaimer of opinion, which is law shall be punished with up to two years’ imprisonment and up to 5,000 to be assessed on a case-by-case basis. days of judicial monetary fine. The General Communiqué on Tax Procedure Law (Series No. 229) 18 Disclosure of violations or irregularities regulates, inter alia, the penalty imposed in the event of committing fraud, To what extent must companies disclose violations of anti- the description of what is to be understood from gross fault and special irregularities (such as invoicing a service or good that has not been pur- bribery laws or associated accounting irregularities? chased and not issuing a retail sales certificate). Section 5 of the Turkish Constitution of 1982, entitled ‘Privacy and Issuing fake invoices and irregularity on invoices (such as obtaining an Protection of Private Life’, and in particular article 22, preserves the secrecy invoice for a donation that was not given) are penalised according to the of communication. The Turkish Civil Code, article 23 et seq, includes provisions of the Criminal Code (article 207 – imprisonment from one to provisions regulating the protection of personal rights in general. Also, three years) and the Turkish Tax Procedure Law No. 213 (article 353 – pen- according to article 24, an individual whose personal rights are violated alty of 10 per cent of the difference between the actual value of the invoice unjustly is entitled to file a civil action. and the value forged, but that is no lower than 180 Turkish lira). Therefore, in practice, corporations place provisions within their employment contracts that are to be signed by the employee and the 21 Tax-deductibility of domestic or foreign bribes officer of the corporation, indicating what items constitute the ‘property Do your country’s tax laws prohibit the deductibility of of the corporation’ and these generally include computers, memory disks, domestic or foreign bribes? and any kind of document, whether printed or not, in order to prevent any ambiguity in relation to employee claims regarding what may constitute In order to assess the net profit, article 40 of the Income Tax Law No. 193 personal data. regulates those expenses that can be deducted from income tax. These Second, while the principle of confidentiality prevails in matters expenses are: general expenses that are incurred to generate and maintain relating to accounting (article 5 of Turkish Tax Procedure Law No. 213), the commercial income, accommodation expenses for staff and employees at disclosure of violations (such as a forged document or misleading docu- the workplace or for the equipment of the workplace, treatment and medi- ment) constituting accounting irregularity to the relevant public organisa- cal expenses, insurance premium and retirement allowance, damages, tion and union and professional associations, which are established with costs and compensation that is paid as per an agreement, judicial decision Law No. 3568 on Independent Accountants and Financial Advisers, will or a legal provision (subject to its being related to the respective work), not be a breach of the confidentiality principle. The Ministry of Finance work and residence expenses that are related to the respective work and is responsible for determining the procedure regarding the disclosure of that are reasonable in relation to the scope and nature of the relevant work, such information. expenses relating to vehicles used in relation to the work, real tax, duties Additionally, information and documents that are requested in rela- and charges amortisations indicated in the Turkish Tax Procedural Law. tion to civil and administrative investigations conducted by public officials Expenses other than those enumerated under the foregoing article cannot can be disclosed pursuant to Turkish Tax Procedure Law No. 213. be deducted from tax and any indication of other expenses in company and The obligation to keep financial records and books as stipulated in the financial records will violate both the Turkish Tax Procedure Law No. 213 Turkish Commercial Code must be fulfilled in accordance with the provi- and the Turkish Criminal Law, depending on the facts. sions of the Turkish Tax Procedure Law No. 213 (specifically article 215, requiring that the books be kept in Turkish; article 216, requiring that the Domestic bribery books be kept in ink; article 217, requiring that any misinformation should 22 Legal framework be corrected by way of appropriate markings). Furthermore, publicly held companies are subject to the provisions of Describe the individual elements of the law prohibiting bribery the Communiqué on Financial Reporting in Capital Markets (Series No. II, of a domestic public official. 14.1). Bribing domestic public officials under the Criminal Code is regulated both for individuals who provides benefit to public officials or other per- sons whom they indicate, as well as for public officials who benefit for
212 Getting the Deal Through – Anti-Corruption Regulation 2015 ELIG, Attorneys-at-Law TURKEY themselves or provide benefit to other persons (article 252(1) and article receipt of gift or hospitality, irrespective of its monetary value, constitutes 252(2), Criminal Code). In both cases, bribery takes place in relation to the a violation of the rule set forth by both Law No. 657 and the Regulation. execution of their duty to perform or not to perform directly or via interme- However, article 15 of the Regulation provides that the following items diaries. Both the persons granting the benefit and the government official do not fall within the scope of the rule stipulated thereunder: are subject to criminal liability, irrespective of whether there are actually • gifts donated to institutions or received on the condition that they are agreements between them to enter into a bribe. Sanctions – albeit reduced allocated to public service, registered with the inventory list of the rel- ones – are imposed on parties proposing to bribe their counterparts, even evant public institution and announced to the public; if the counterparts do not agree to such proposal (article 252(4), Criminal • books, magazines, articles, cassettes, calendars, CDs or similar Code). material; • rewards and gifts received within public contests, campaigns or 23 Prohibitions events; Does the law prohibit both the paying and receiving of a bribe? • souvenirs given in public conferences, symposiums, forums, panels, meals, receptions and similar events; See question 5. • advertisement and handicraft products distributed to everyone and having symbolic value; and 24 Public officials • loans extended by financial institutions on market conditions. How does your law define a public official and does that In addition to the foregoing, Notice No. 2004/27 on the Public Officials definition include employees of state-owned or state- Council of Ethics regulates the duties and obligations of the Council of controlled companies? Ethics, which was established with Law No. 5176 on the Establishment of The Criminal Code defines ‘public official’ as any person who performs the Public Officials Council of Ethics and Certain Laws. According to the a public activity through appointment or selection on an unlimited, per- notice, the Council of Ethics determines the scope of the prohibition on manent or temporary basis (article 6(1c)). This general definition of public receiving gifts and can request, if need be, at the end of each calendar year, official is extended for the purposes of the crime of bribery. The following a list of the gifts that have been received by senior-level public officials who persons are also considered public officials: are at least of a general manager level or equivalent. • officials of professional institutions that are public institutions, such as chambers of commerce and industry or the union of bar associations; 28 Private commercial bribery • officials of companies that have been incorporated by the participation Does your country also prohibit private commercial bribery? of public institutions or entities, or professional organisations that are public institutions; As of July 2012, the Criminal Code regulates private commercial bribery. • officials of foundations that carry out their activities within a body of Accordingly, if a benefit is provided, offered or promised; if the respec- public institutions or entities, or professionals; tive individuals request or accept such benefit; if such is mediated; and if • officials of cooperatives; and benefit is provided to another individual due to the foregoing relationship, • officials of publicly traded joint-stock companies (article 252(8)). the general provisions regulating domestic bribery are applicable to indi- viduals acting on behalf of the following entities, irrespective of whether 25 Public official participation in commercial activities the individual is a public official, and in relation to the execution of the respective individual’s duty to directly or, via intermediaries, perform or Can a public official participate in commercial activities while not perform: serving as a public official? • occupational organisations that are public institutions; Law No. 657 on Public Officials prohibits public officials from being • companies that have been incorporated by the participation of public involved in any commercial activity. Therefore, throughout their employ- institutions or entities, or occupational organisations that are public ment with the government, public officials can neither be employed by nor institutions; provide consultancy services to any private entity (article 28). • foundations that carry out their activities within a body of public institutions or entities, or occupational organisations that are public 26 Travel and entertainment institutions; • associations working in the public interest; Describe any restrictions on providing domestic officials • cooperatives; and with gifts, travel expenses, meals or entertainment. Do the • publicly traded joint-stock companies (article 252(8), Criminal Code). restrictions apply to both the providing and receiving of such benefits? 29 Penalties and enforcement See question 27. What are the sanctions for individuals and companies violating the domestic bribery rules? 27 Gifts and gratuities Please refer to questions 14 and 15 respectively for the sanctions imposed Are certain types of gifts and gratuities permissible under your on companies and individuals violating domestic bribery rules. domestic bribery laws and, if so, what types? 30 Facilitating payments Article 29 of Law No. 657 explicitly regulates the prohibition of public offi- cials receiving gifts and providing benefits. According to this article, it is Have the domestic bribery laws been enforced with respect to prohibited for public officials to directly or via an intermediary request facilitating or ‘grease’ payments? gifts and accept gifts for the purpose of taking advantage, even if such act See question 6. is not taken on duty, or to request to borrow money from their employers or receive such money. Pursuant to the second paragraph of the same article, the Public Officials Council of Ethics is authorised to determine the scope 31 Recent decisions and investigations of the prohibition of receiving gifts and, where necessary, request a list, at Identify and summarise recent landmark decisions and the end of each calendar year, of gifts that were accepted by public officials investigations involving domestic bribery laws, including any who are at least at general director level or an equivalent high-level official. investigations or decisions involving foreign companies. The Regulation on the Ethical Behaviour Principles of Public Officials (the Regulation) prohibits public officials from receiving gifts or obtaining In an ongoing investigation that contains allegations with regard to money- further benefits for themselves, their relatives, third parties or institutions laundering, bribery and gold smuggling, sons of three cabinet ministers, from individuals or legal entities, in relation to their duties. The Regulation along with the general manager of state-owned Halkbank and a busi- does not set any monetary limit on such gifts or benefits. According to ness tycoon known for gold trade have been initially detained as suspects Resolution No. 2007/1 of the Council of Ethics for Public Officials, the through the course of the investigation. Subsequently, the three cabinet ministers have resigned in face of the allegations. In October 2014, the www.gettingthedealthrough.com 213 TURKEY ELIG, Attorneys-at-Law
Update and trends Before 2005, the legislative landscape for Turkish anti-corruption meetings solely on a legal basis, and that it was necessary to consider matters was limited to the provisions set out in the former Criminal anti-corruption at a social and economic level as well, embracing all Code, with a few regulations and relevant other laws guiding segments of society. An action plan for the years 2010 to 2015 was individuals, corporations, the judiciary and law enforcement entities subsequently adopted to support the implementation of the Strategy. in interpreting and understanding what constituted bribery and how The main components of the Strategy include preventive measures, law to combat corruption in the Turkish public sphere. There has been a enforcement measures and measures to raise awareness. rapid increase in legislation regulating bribery and corruption since the The legislation is being gradually clarified through regulatory enactment of the current Turkish Criminal Code in 2005. This increase notices and legislative amendments, the most recent being the has been associated with a general increase in the frequency and amendments made in early July 2012, to the core bribery and severity of enforcement activity concerning foreign public officials and whistle-blowing provisions stipulated under the Turkish criminal law foreign companies active in Turkey. architecture. While such amendments are highly welcome, there are still The National Anti-Corruption Strategy was adopted in 2010 by a weaknesses in the framework, including a lack of criminal liability for cabinet decree, involving several institutions such as the parliament, the companies. However, similar positive developments can be foreseeable Public Prosecutor, the Ministry of Interior, customs and administrative in the near future as Turkey continues to address these weaknesses in bodies, as well as the Ministry of Finance. The Strategy was adopted the domestic legislation, and follow suit with global anti-corruption on the basis that it was insufficient to deal with anti-corruption practices in the international arena.
Public Prosecutor issued a non-prosecution decision about the case. The military culminated in the indictment of the suspects. The indictment investigation conducted by the Parliamentary Inquiry Commission with demands that the suspects should be sentenced with four to 198 years of regard to the four previous cabinet members involved in the corruption imprisonment. investigation resulted with a negative decision regarding the trial of the One of the most recent cases is a bribery investigation against public said four persons before the Turkish constitutional court. However, the authorities working under the Firefighting Department of the Istanbul ultimate decision regarding the trial of the said persons before the Turkish Metropolitan Municipality and multiple business owners. In October 2014, constitutional court lies with the Parliament. multiple public authorities and business owners were taken into custody Another recent corruption case again concerns the bribery of domes- for reasons of soliciting and providing bribes in order for undue work place tic public officials. In September 2014, a three-year investigation into the permits to be provided. Subsequently, 13 people were arrested. The inves- allegations of bribery and bid-rigging regarding purchases made by the tigation is ongoing.
Gönenç Gürkaynak [email protected] Ç Olgu Kama [email protected]
Çitlenbik Sokak No. 12 Tel: +90 212 327 17 24 Yıldız Mahallesi Fax: +90 212 327 17 25 Bes¸iktas¸ 34349 www.elig.com Istanbul Turkey
214 Getting the Deal Through – Anti-Corruption Regulation 2015 Law Offices Alekseev, Boyarchukov and partners UKRAINE
Ukraine
Igor Gavrilov and Sergey Aleksandrov Law Offices Alekseev, Boyarchukov and partners
1 International anti-corruption conventions by imprisonment for up to eight years together with confiscation of the To which international anti-corruption conventions is your briber’s property. country a signatory? Provocation of a bribe Ukraine has signed and ratified a number of international anti-corruption According to article 370 of the Criminal Code of Ukraine, provocation of conventions: an unlawful benefit is circumstances and conditions deliberately created • the Council of Europe Criminal Law Convention on Corruption, by an official that provoke offering, promising or giving an unlawful -ben entered into force on 1 March 2010; efit or acceptance of them with the aim to expose the briber thereafter. • the Additional Protocol to the Criminal Law Convention on The penalty for this crime may be custodial restraint for up to five years, Corruption, entered into force on 1 March 2010; by imprisonment for up to seven years and by a fine of up to 11,900,00 • Council of Europe Civil Law Convention on Corruption, entered into hryvnas. force on 1 January 2006; • the United Nations Convention against Corruption, entered into force 4 Definition of a foreign public official on 1 January 2010; and How does your law define a foreign public official? • the United Nations Convention against Transnational Organized Crime, entered into force on 21 May 2004. The term ‘Foreign public officials’ is used in Ukraine only in the context of defining the persons liable for crimes related to corruption. Definition of a 2 Foreign and domestic bribery laws foreign public official has been borrowed by Ukrainian legislation directly Identify and describe your national laws and regulations from the UN Convention against corruption. The main difference between the two lies in considering of foreign arbiter and jury members as foreign prohibiting bribery of foreign public officials (foreign bribery public officials by the Ukrainian legislation. laws) and domestic public officials (domestic bribery laws). Both the Anti-corruption Law (article 4) and the Criminal Code (arti- Legislation prohibiting bribery is spread across a number of Ukrainian laws cles 18 and 364) contain this definition without any differences between and regulations, including: two sources. The foreign public officials are defined as persons: • the Law of Ukraine on the Principles of Preventing and Combating • holding a legislative, executive, administrative or judicial office of a Corruption 2011 (the Anti-Corruption Law); foreign country, including members of the jury; • the Criminal Code of Ukraine of 2001; • other persons exercising a public function for a foreign country, • the Code of Ukraine on Administrative Offences of 1984; and including for a public agency or a public enterprise; or • the Law of Ukraine on State Civil Service of 1993. • foreign arbiters authorised to resolve civil, commercial or labour dis- putes in foreign countries in a process alternative to the court process. Foreign bribery Ukrainian legislation does not count officials of a public international 3 Legal framework organisations (international civil servant or any person who is authorised Describe the elements of the law prohibiting bribery of a by such an organisation to act on behalf of that organisation), members foreign public official. of international parliamentary assemblies where Ukraine is a participant, members and officials of international courts as foreign public officials but The Criminal Code contains main legal provisions defining which acts just as officials. constitute bribery and thus are criminal offences. 5 Travel and entertainment restrictions Receiving a bribe To what extent do your anti-bribery laws restrict providing Under article 368 of the Criminal Code of Ukraine, receiving a bribe is acceptance of an offer, promise or receiving of an unlawful benefit by an foreign officials with gifts, travel expenses, meals or official as well as a request for such a benefit in return for taking some entertainment? action or refraining from it exploiting official authorities vested in this When determining whether bribery has taken place the Anti-corruption official. Receiving a bribe may be punished by a fine of up to 25,500,00 Law and the Criminal Code of Ukraine do not distinguish between types hryvnas, by arrest for up to six months, by imprisonment for up to 12 years of gifts, considerations and advantages and do not take into account their and by prohibition to be appointed to certain offices or to carry out certain value. Any such gifts to a foreign public official will be considered as bribes activity together with confiscation of the briber’s property. if provided with an intent of bribery.
Offering or giving a bribe 6 Facilitating payments Article 369 of the Criminal Code of Ukraine defines offering or giving a Do the laws and regulations permit facilitating or ‘grease’ bribe as offering or promising made to an official to provide him or her or a third person with an unlawful benefit, as well as giving such a ben- payments? efit for taking an action of refraining from it taking advantage of official Ukrainian legislation does not permit facilitation or ‘grease’ payments. authorities vested in this official. Such actions may be punished by a fine Moreover, solicitation of such payments will be considered a bribe. of up to 12,750,00 hryvnas, by a custodial sentence of up to four years, www.gettingthedealthrough.com 215 UKRAINE Law Offices Alekseev, Boyarchukov and partners
7 Payments through intermediaries or third parties seriousness of the crime; public interest in a prompt investigation and time In what circumstances do the laws prohibit payments through to be spent for the relevant criminal proceedings; public interest in pre- venting, exposing or putting an end to more crimes. intermediaries or third parties to foreign public officials? It should be also noted that the court has to approve the settled plea The offences under the Anti-corruption Law and the Criminal Code do not agreement. differentiate between bribery performed directly or through intermediar- ies. Any such payment made through an intermediary will be considered 13 Patterns in enforcement as given directly and the intermediary will be considered as an accomplice Describe any recent shifts in the patterns of enforcement of the to the act of bribery in accordance with articles 26, 27, 28 and 29 of the foreign bribery rules. Criminal Code of Ukraine. The establishment of the State Investigation Bureau may have new impact 8 Individual and corporate liability on enforcement of the foreign bribery rules. Can both individuals and companies be held liable for bribery 14 Prosecution of foreign companies of a foreign official? In what circumstances can foreign companies be prosecuted Under the Criminal Code of Ukraine companies are not criminally liable for foreign bribery? for bribery. However, companies bear civil liability for bribery that is represented in certain negative consequences. In particular, according to According to the legislation of Ukraine, a legal entity may not be prose- the Anti-Corruption Law, contracts and other documentation originating cuted by itself. Nevertheless, as per the amendments to the Criminal Code, from a corrupt offence are considered null and void and will lead to other a legal entity may be held accountable for the actions of its representatives, negative consequences as defined by civil and commercial legislation (eg, if they led or potentially could lead to unlawful profit for the legal entity, fines, reimbursement of losses, etc). or were directed at avoiding lawful punishment. In relation to corruption such actions may include committing certain types of bribery (bribery of 9 Civil and criminal enforcement an official of any legal entity, bribery of a person providing public services, Is there civil and criminal enforcement of your country’s proposal or provision of unlawful benefit, misuse of influence), or non- performance of duties in preventing corruption, if this led to the perfor- foreign bribery laws? mance of the above-mentioned acts of bribery. Ukrainian legislation provides for both civil and criminal enforcement of At the same time, the Criminal Code of Ukraine does not provide foreign bribery laws in Ukraine that are described in other clauses herein. exceptions for the foreign companies in cases of foreign bribery.
10 Agency enforcement 15 Sanctions What government agencies enforce the foreign bribery laws What are the sanctions for individuals and companies violating and regulations? the foreign bribery rules? According to article 216 of the Criminal Procedural Code of Ukraine, the Companies involved in bribery may be fined or liquidated, their respective duty to investigate all crimes (with a number of exceptions), including deals can be acknowledged null and void, the profits obtained unlawfully, bribery and corruption, lies with the investigators of the Ministry of may be confiscated. Internal Affairs. As stipulated by the Criminal Code of Ukraine, any losses and dam- The one exception stipulated in the same article 216 is investigation of ages that took place in connection to involvement of a legal entity in crimes committed by the President of Ukraine, the Head of the Supreme bribery, must be reimbursed in full, the sum of compensation should Council of Ukraine and his or her deputies, heads of commissions of the include the sum of unlawful profit obtained or which could be obtained by Supreme Council of Ukraine and their deputies, members of parliament, the legal entity. the Prime Minister of Ukraine, members of the Cabinet of Ministers of Private individuals may be also fined, arrested, imprisoned, their free- Ukraine, head and members of the Constitutional, Supreme and High dom may be restrained and they can be prohibited from being appointed Specialised Courts of Ukraine, Attorney General of Ukraine and his or to certain offices and from carrying out certain activities, their property her deputies, other high-ranking (categories 1-3) state officials, judges and relevant to bribery can be confiscated. employees of law enforcement agencies. Crimes committed by the above- mentioned persons are to be investigated by investigators from the State 16 Recent decisions and investigations Investigation Bureau. Identify and summarise recent landmark decisions or investigations involving foreign bribery. 11 Leniency Is there a mechanism for companies to disclose violations in One of the most recent notorious bribery cases in Ukraine concerns the import of coal from the Republic of South Africa. There is currently a crimi- exchange for lesser penalties? nal investigation against officials in Tsentrenergo JSC and State Enterprise Speaking about prosecuting for bribing, it should be noted that there is Ukrinterenergo and a number of other entities. One of the episodes in this no mechanism for companies to disclose violations in exchange for lesser case involved entering into an international contract for purchase of coal penalties as companies in Ukraine are not held liable for bribing as was from the RSA for Ukrainian thermoelectric power stations. It is reported explained in question 8. that the director of State Enterprise Ukrinterenergo entered into a contract with Steel Mont Trading Ltd and bought 1 million metric tons of coal that 12 Dispute resolution could not be used owing to its poor quality. The total amount of the contract was about US$30 million. This deal is considered to be an embezzlement Can enforcement matters be resolved through plea committed in the course of duty. Such an offence is covered by article 191 agreements, settlement agreements, prosecutorial discretion of the Criminal Code of Ukraine, which provides for a maximum penalty in or similar means without a trial? the form of imprisonment for 12 years. The Criminal Procedure Code of Ukraine provides a possibility of a plea bargain on the recognition of guilt between the prosecutor and the criminal Financial record keeping defendant. 17 Laws and regulations Such plea may be made at any time from the moment when a person becomes a suspect until the end of the hearing of the case. Plea bargaining What legal rules require accurate corporate books and records, is possible for minor offences, misdemeanours and crimes that resulted in effective internal company controls, periodic financial damage to national or public interests. statements or external auditing? Before reaching a settlement the following information is to be Ukrainian legislation includes a number of laws concerning accurate book- taken into account: the defendant’s cooperation during the investigation; keeping, audit and submission of financial and tax statements:
216 Getting the Deal Through – Anti-Corruption Regulation 2015 Law Offices Alekseev, Boyarchukov and partners UKRAINE
• the Tax Code of Ukraine; • authority abuse by an official of the law enforcement body (article 365); • the Commercial Code of Ukraine; • authority abuse by public services providers (auditors, notaries, • the Law of Ukraine on Accounting and Financial Reporting in Ukraine; experts, etc) (article 365-2); • the Law of Ukraine on Auditing Activities; • falsification made by an official (article 366); • the Law of Ukraine on Commercial Companies; • submitting of false tax returns and similar documentation (article • the Law of Ukraine on Joint Stock Companies; and 366-1); • the Law of Ukraine on Securities and the Stock Market. • neglect of duty (article 367); • unlawful enrichment (article 368-2); 18 Disclosure of violations or irregularities • bribery of management of a private legal entity (368-3); To what extent must companies disclose violations of • bribery of a public services provider (article 368-4); • misuse of authority (article 369-2); and anti-bribery laws or associated accounting irregularities? • bribery provocation (article 370). In general, Ukrainian legislation does not directly oblige companies to disclose violations of anti-bribery or associated accounting irregularities. 23 Prohibitions However, the Anti-Corruption Law, for instance, obliges state and local Does the law prohibit both the paying and receiving of a bribe? authorities, legal entities and their subsidiaries to report about known corruption to the relevant authority. Both paying and receiving of a bribe is prohibited by Ukrainian legislation.
19 Prosecution under financial record keeping legislation 24 Public officials Are such laws used to prosecute domestic or foreign bribery? How does your law define a public official and does that definition include employees of state-owned or state- On its own, the Ukrainian legislation related to financial record keeping is controlled companies? not used to prosecute domestic or foreign bribery. For the purposes of prosecution for bribery public officials are defined as 20 Sanctions for accounting violations persons: What are the sanctions for violations of the accounting rules • who permanently, temporarily or under special authority perform associated with the payment of bribes? functions of representing state or local authorities; • who permanently or temporarily occupy positions in state or local Ukrainian legislation contains general provisions on sanctions for violation bodies, state or municipal enterprises (including those where the state of book-keeping and tax-reporting as well as special provisions on sanc- has a substantial share), institutions or organisations, related to mana- tions for violation of income-reporting by public officials. gerial or business-administrative functions; or Absence of bookkeeping or violation of bookkeeping rules, non- • for whom a special authority to perform such functions has been provision or provision of incorrect financial statements are considered as provided by a respective state or local authority, central state executive offences under article 164-1 and article 164-2 of the Code of Ukraine on body with a special authority, authorised body or official of an enter- Administrative Offences and are punished by a fine of up to 340 hryvnas. prise, institution or organisation, court or law. Absence of tax reporting or violation of tax-reporting rules are considered as offences under article 163-1 of the Code of Ukraine on 25 Public official participation in commercial activities Administrative Offences and are punished by a fine of up to 255 hryvnas. Can a public official participate in commercial activities while Non-submission or late submission of income reports by public serving as a public official? officials are considered as offences under article 172-6 Code of Ukraine on Administrative Offences and are punished by a fine of up to 5,100,00 hry- Ukrainian public officials are prohibited by law (article 7 of the Anti- vnas, confiscation of the income, prohibition from appointment to certain Corruption Law) from conducting any paid or commercial activity apart offices or having to carry out a certain activity for up to one year. from scholarly, scientific and artistic activities, medical practice, coaching and refereeing practice in sports. 21 Tax-deductibility of domestic or foreign bribes Moreover, article 7 of the Anti-Corruption Law stipulates that Ukrainian Do your country’s tax laws prohibit the deductibility of public officials may not act as members of management or supervisory domestic or foreign bribes? boards in commercial legal entities (except when they officially manage shares owned by the state or local government). The list of deductible expenses is stated in the Tax Code of Ukraine, and The same article 7 provide for that restrictions mentioned above do expenses on bribe payments are not included in the list. not concern deputies of the parliament of the Autonomous Republic of Crimea, deputies of local councils (except those who are elected perpetu- Domestic bribery ally), members of the Higher Council of Justice (except those working perpetually), people’s assessors and jurors. 22 Legal framework Describe the individual elements of the law prohibiting bribery 26 Travel and entertainment of a domestic public official. Describe any restrictions on providing domestic officials The Code of Ukraine on Administrative Offences contains a number of with gifts, travel expenses, meals or entertainment. Do the articles that may apply in bribery cases (they pertain to officials): restrictions apply to both the providing and receiving of • violation of restrictions as to combining offices with other activities such benefits? (article 172-4); • violation of restriction as to gift acceptance (article 172-5); The existing restrictions apply to both the providing and receiving of such • late submission of tax returns (article 172-6); benefits even though they do not differentiate benefits as gifts, meals, etc. • failure to report about conflict of interests (article 172-7); The Anti-Corruption Law provides for prohibition to accept gifts and • illegal use of information available during the course of duty (article donations (regardless if done directly or through an intermediary) from 172-8); and legal entities or individuals as a reward for decisions, actions or inactions • failure to take actions against corruption offences (article 172-9). in favour of the giver. This rule applies to several potential beneficiaries, such as: The provisions of the Criminal Code of Ukraine prohibiting bribery have • public officials and officials of local authorities; been discussed above. However, a few more cases should be mentioned as • officials in the Ukrainian army and other military units; regards domestic public officials: • judges, people’s assessors and jurors; • authority or office abuse (article 364); • public prosecutors, security service officers, officials of the diplomatic • authority abuse committed by management of a private legal entity service, customs and tax officers; (article 364-1); www.gettingthedealthrough.com 217 UKRAINE Law Offices Alekseev, Boyarchukov and partners
an officer of a private legal entity in return for performance or non- Update and trends performance of certain actions in the interests of the perpetrator or a third party while exercising his or her authority); It should be noted that despite much speculation and allegations • bribery of a provider of public services (article 368-4 of the Criminal about different bribery and corruption cases at all levels of state Code prohibits offering, promise of provision, provision, transferring apparatus and entities, not many get to court hearings and even fewer reach the sentencing stage. to or accepting an unlawful benefit from a provider of public services in return for the performance or non-performance of certain actions in the interests of the perpetrator or a third party while exercising his or her authority). • management and officers of state-owned entities who are paid from the state or local budgets; 29 Penalties and enforcement • directors, officers, and employees of private legal entities being persons What are the sanctions for individuals and companies violating who provide public services (eg, auditors, notaries, experts, etc); and the domestic bribery rules? • members of a national or local assembly of a political party. Please refer to questions 3 and 15 as the law does not differentiate between However, there are reasonable exceptions to the aforementioned rules. In domestic and foreign bribing in this regard. particular, these persons may receive and accept gifts that satisfy hospital- ity and donation criteria provided that the gift’s cost does not exceed half 30 Facilitating payments of the minimum salary determined on the day the gift or donation is made Have the domestic bribery laws been enforced with respect to (currently 609 hryvnas) and total value of gifts or donations within a year facilitating or ‘grease’ payments? should not be more than such one minimum salary determined on the first day of January of the current year. As was discussed in question 6, Ukrainian legislation does not permit facil- itation or ‘grease’ payments and solicitation of such payments is bribery. 27 Gifts and gratuities Hence domestic bribery laws are enforced with respect to both facilitating Are certain types of gifts and gratuities permissible under your and ‘grease’ payment. domestic bribery laws and, if so, what types? 31 Recent decisions and investigations See question 26. Identify and summarise recent landmark decisions and investigations involving domestic bribery laws, including any 28 Private commercial bribery investigations or decisions involving foreign companies. Does your country also prohibit private commercial bribery? In 2012, pursuant to the Plan of the Supreme Court of Ukraine in the The following acts punishable under the Criminal Code may be considered firsthalf of 2012 the Supreme Court of Ukraine together with the appel- as acts of commercial or private bribery: late courts had analysed resolved bribery cases. The task of the analysis • bribery of an employee of a legal entity (article 354 of the Criminal was to clarify the nature (essence) of errors that courts make deciding on Code prohibits offering, promise of provision, provision, transferring bribery cases, to investigate conditions and their causes in order to avoid or accepting an unlawful benefit to an employee of a legal entity in mistakes in the future, and also to ensure implementation of the princi- return for performance or non-performance of certain actions in the ples of legality, validity and fairness in determining the sentence for such interests of the perpetrator or a third party while exercising his or her crimes. According to the State Judicial Administration of Ukraine, there position); were 767 persons in 2011 convicted for the crime of bribery. • bribery of an official of a private legal entity (article 368-3 of the According to information published by the Supreme Court of Ukraine, Criminal Code prohibits offering, promising to provide provision, the overall analysis showed that anti-corruption legislation by courts in provision, transferring to or accepting an unlawful benefit from corruption cases is currently being set up.
Sergey Aleksandrov [email protected]
11, Shota Rustaveli Str Tel: +380 44 235 8877 / +380 44 537 1828 3rd floor Fax: +380 44 235 8827 Kiev www.abp.kiev.ua Ukraine, 01001
218 Getting the Deal Through – Anti-Corruption Regulation 2015 Afridi & Angell UNITED ARAB EMIRATES
United Arab Emirates
Charles Laubach Afridi & Angell
1 International anti-corruption conventions 6 Facilitating payments To which international anti-corruption conventions is your Do the laws and regulations permit facilitating or ‘grease’ country a signatory? payments? The United Arab Emirates (UAE) ratified the United Nations Convention None, in the context of a foreign public official. against Corruption (the Convention) pursuant to Federal Decree No. 8 of 2006. 7 Payments through intermediaries or third parties In what circumstances do the laws prohibit payments through 2 Foreign and domestic bribery laws intermediaries or third parties to foreign public officials? Identify and describe your national laws and regulations None, in the context of a foreign public official. prohibiting bribery of foreign public officials (foreign bribery laws) and domestic public officials (domestic bribery laws). 8 Individual and corporate liability Domestic bribery laws Can both individuals and companies be held liable for bribery Bribery is punishable in the UAE according to articles 234 to 239 of the UAE of a foreign official? Penal Code, Federal Law No. 3 of 1987 (the Federal Penal Code), which applies to the UAE as a whole. The Emirate of Dubai also has its own penal In the context of a foreign official, there are no provisions under UAE law code, the Penal Code 1970 (Dubai Penal Code). In addition to the above, that are relevant. two further laws are directly related to bribery. These are Federal Decree- Law No. 11 of 2008 (also known as the ‘Federal Human Resources Law’) 9 Civil and criminal enforcement and more recently Dubai Law No. 37 of 2009 on the Procedures for the Is there civil and criminal enforcement of your country’s Recovery of Illegally Obtained Public and Private Funds (Financial Fraud foreign bribery laws? Law). These are each discussed in the relevant sections of this chapter. No legislation has been passed in the UAE determining the proceedings Foreign bribery laws which may be resorted to in cases involving bribery against foreign officials. As discussed in question 1, the UAE has ratified the Convention pursuant to Federal Decree No. 8 of 2006. 10 Agency enforcement What government agencies enforce the foreign bribery laws Foreign bribery and regulations? 3 Legal framework As the UAE has yet to promulgate laws in implementation of the Describe the elements of the law prohibiting bribery of a Convention, there is presently no government agency that has been foreign public official. appointed to enforce foreign bribery laws and regulations.
The Convention as adopted by Federal Decree No. 8 of 2006 requires each 11 Leniency state party to adopt such legislative and other measures as may be neces- sary to establish as a criminal offence the bribery of foreign officials and Is there a mechanism for companies to disclose violations in officials of public international organisations. The UAE has yet to meet the exchange for lesser penalties? obligation to criminalise bribery of foreign public officials and officials of None, in the context of bribery of foreign public officials. international public organisations. Applicable legislation is not yet in place in connection with prohibiting bribery of a foreign official and matters 12 Dispute resolution related thereto. Can enforcement matters be resolved through plea 4 Definition of a foreign public official agreements, settlement agreements, prosecutorial discretion or similar means without a trial? How does your law define a foreign public official? No, in the context of bribery of foreign public officials, given the absence As mentioned in question 3, the UAE has not as yet enacted any legislation of relevant legislation. that criminalises bribery of foreign public officials. 13 Patterns in enforcement 5 Travel and entertainment restrictions Describe any recent shifts in the patterns of enforcement of the To what extent do your anti-bribery laws restrict providing foreign bribery rules. foreign officials with gifts, travel expenses, meals or entertainment? Not applicable. See questions 1 and 3. None, in the context of foreign public officials.
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14 Prosecution of foreign companies 18 Disclosure of violations or irregularities In what circumstances can foreign companies be prosecuted To what extent must companies disclose violations of anti- for foreign bribery? bribery laws or associated accounting irregularities? There is no specific set of laws in the UAE regulating the procedure to be UAE law does not make any specific requirements upon auditors to disclose followed in order to prosecute foreign companies with respect to foreign- any violation under anti-bribery laws. However, in terms of Federal Law related bribery. No. 22 of 1995 and a circular issued by the Ministry of Economy in March 2003, there is a requirement for all auditors when necessary and in view 15 Sanctions of promoting the public interest, to furnish any information in respect of What are the sanctions for individuals and companies violating a company or establishment for which he was or still is handling the audit to the ‘competent authorities’ when required, provided that the competent the foreign bribery rules? authority must obtain authorisation from the competent judicial author- No sanctions are prescribed in the UAE for individuals and companies ity prior to requesting such information. Accordingly, any disclosure by an violating foreign bribery rules. auditor in the UAE can only be pursuant to the foregoing.
16 Recent decisions and investigations 19 Prosecution under financial record keeping legislation Identify and summarise recent landmark decisions or Are such laws used to prosecute domestic or foreign bribery? investigations involving foreign bribery. There are no known instances of such prosecutions. There are no decisions or investigations that we are aware of involving foreign bribery. 20 Sanctions for accounting violations What are the sanctions for violations of the accounting rules Financial record keeping associated with the payment of bribes? 17 Laws and regulations There are no specific sanctions against violations of accounting rules What legal rules require accurate corporate books and records, which are associated with the payment of bribes. However, Federal Law effective internal company controls, periodic financial No. 4 of 2002 on the Criminalisation of Money Laundering (the Federal statements or external auditing? Money Laundering Law) provides that any individual who perpetrates or assists in the commission of any of the following acts in respect of property Federal Law No. 8 of 1984 pertaining to Commercial Companies Law (the (as defined by article 2(e) of the Federal Money Laundering Law, which Commercial Companies Law) contains general provisions with respect to includes, inter alia, assets obtained through an offence of bribery, embez- financial statements and the appointment of external auditors with respect zlement and damage to public property) will be considered to have com- to UAE companies. The following are required to be fulfilled with respect mitted an act of money-laundering: to the appointment of external auditors: • transfer, conveyance or depositing of the proceeds with intention to • they must be listed in the Register of Auditors and Accountants in conceal or camouflage the illicit source thereof; accordance with Federal Law No. 22 of 1995 Regarding Organisation • concealment or camouflaging of the nature, source, location, disposi- of Auditing Profession (Federal Law No. 22 of 1995), which regulates tion, movement, pertinent rights or ownership of the proceeds; or the professions of auditing and accountancy; • acquisition, possession or usage of such proceeds. • the auditors appointed by the company may not hold positions as a participant in the company’s establishment, be a member of the board Pursuant to this provision, it can be inferred that any auditor who commits of directors of the company or hold any technical, administrative or or assists in committing any of the aforementioned acts would be liable consultative position; and under the Federal Money Laundering Law. • the auditors must not be partners or agents of any of the founders of the company or of any of the members of the board of directors of the 21 Tax-deductibility of domestic or foreign bribes company or related to any member of the board of directors up to the Do your country’s tax laws prohibit the deductibility of fourth degree. domestic or foreign bribes? Article 197 of the Commercial Companies Law (which applies to public The UAE is a tax-free regime and does not have provisions in law regulat- joint-stock companies and private joint-stock companies) restricts a com- ing any tax-deductibility in the country. pany from offering any type of cash loan to the chairman of the company or a member of the board of directors and also prohibits the company from Domestic bribery guaranteeing a loan to the chairman or the member of the board of direc- tors. Certain exceptions are made in the case of the chairman and board 22 Legal framework of directors of banks and credit companies. In terms of article 198 of the Describe the individual elements of the law prohibiting bribery Commercial Companies Law, a company (ie, a public joint-stock company of a domestic public official. or a private joint-stock company) is also restricted from making any loans or donations within two years of incorporation of the company unless these The Federal Penal Code donations are made by way of customary gifts from the profits of the com- Provisions are contained in articles 234 to 239 of the Federal Penal Code. pany. With regard to other gifts, in order that a donation be valid, authori- In terms of article 234, it is an offence for any public officer or person sation of the board of directors based upon permission granted by the to whom a public service is assigned to solicit or accept for himself or for general meeting is required and must not be in excess of 2 per cent of the another person, a donation, an advantage of any kind or a promise or any- average net profits of the company during the two financial years preceding thing of the like in order to commit or omit an act in violation of the duties the year in which the donation is made. of his function. The provisions of this article are stated to apply even if the Further, Ministerial Resolution No. 518 of 2009 Concerning intent of the said public officer or individual entrusted with a public service Governance Rules and Corporate Discipline Standards apply to all com- was in fact to refrain from committing or omitting the act. panies and institutions whose securities have been listed on a securi- Under article 235, it is an offence for any public officer or any individual ties market in the UAE and to their board members. The said Ministerial to whom a public service is assigned who solicits or accepts for himself or Resolution contains detailed provisions for internal control, the formation for another person a donation or advantage of any kind if he commits or of an audit committee and the appointment of external auditors. omits an act in violation of the duties of his function. In terms of article 236, it is an offence for any public officer or individ- ual to whom a public service is assigned who solicits or accepts for himself or for another person a donation or an advantage of any kind or a promise of anything of the like in order to commit or omit an act which is not part of his function.
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Article 236 further provides that it is an offence if any member of a law differ more in scope (ie, they affect only local government employees board of directors of any of the companies, private establishments, coop- rather than federal employees) than substance from the provisions of the erative societies or public utility societies and any manager or an employee Federal Human Resources Law. in any of them who claimed for himself or for others, before or after having Article 70 of the Federal Human Resources Law prohibits an employee a promise of a gift, to perform or stop performing any of his duties or violat- from accepting, requesting or offering bribes. The said law defines the term ing thereof and promises the convict with a bribe even if not intending to ‘bribes’ to mean offering any amount of money, or a particular service, or do the job or violating his duties and obligations. anything of material or moral value for an employee in exchange for the It is also an offence if the claim, acceptance or attainment was in pur- employee: suance of the performance or stop of performance of the job or violating • accelerating any work that the employee is required by his work to do; his duty obligations and was intending to have a reward even without any • failing to do assigned work; or prior agreement. • to mediate to another to finish an application or take any procedure in In terms of article 237, it is an offence for any individual who offers violation of the applicable laws of the UAE. to a public officer or to any person to whom a public service is assigned, a donation or an advantage of any kind or a promise of anything of the like The term ‘employee’ is defined in the said law to mean anyone who occu- in order to commit or omit an act in violation of the duties of his function. pies one of the jobs contained in the general budget of the government of Article 237 further provides that it is also an offence for any person who the UAE. has acted as a mediator between the briber or the receiver in the offering, soliciting, accepting, receiving or promising of bribery. Code of Professional Conduct and Ethics Article 237 also provides that it is an offence for any individual who Cabinet Resolution No. 15 of 2010 Approving the Code of Professional claims or accepted for himself or for others any gift, privilege or benefit Conduct and Ethics (the Code) was promulgated during 2010. The stated of any sort whatsoever for his interference or the use of his power before objective of the Code is to create and develop a corporate culture for the a public officer to do or stop doing a job or to violate his duty obligations. public servant, enhancing the professional values and the sense of respon- Articles 238 and 239 of the Federal Penal Code are discussed in ques- sibility as well as abiding by the highest ethics in dealing with superiors, tion 29. colleagues or service beneficiaries according to the basic values of human resources and providing the best services to beneficiaries and strengthen- The Dubai Penal Code ing the confidence and credibility in the government sector. The Dubai Penal Code 1970 (the Dubai Penal Code) contains provisions on The term ‘public servant’ is defined in the Code to mean any person the offences of corruption and the abuse of public office. These provisions holding a position in one of the federal authorities. The term ‘federal prohibit the following: authority’ in turn is defined to include ministries or federal public entities • article 118 – the taking of a gratification by a public servant in respect of and institutions. The Code addresses the basic values and rules of profes- an official act; sional conduct and ethics of public servants, commitments of the public • article 119 – taking a gratification in order, by corrupt or illegal means, servant, the federal authority’s obligations towards its employees (ie, pub- to influence a public servant in respect of an official act; lic servants) and certain general guidelines. • article 120 – offering or giving a gratification to a public servant in In the present context, the general guidelines are of particular interest. respect of an official act; They provide that the public servant may not abuse his position, duties or • article 121 – the obtaining of any valuable thing by a public servant, relations established in the course of his work, position or powers to obtain without consideration, from a person concerned in any proceeding or any service, benefit or interest from any person for his personal interest or business transacted by such public servant; and for the interest of any relative up to the fourth degree. • article 122 – the offering of a valuable thing to a public servant without The general guidelines also provide that the public servant must avoid consideration, by a person concerned in any proceeding or business any actual or potential conflict of interest. The term ‘conflict of interest’ is transacted by that public servant. defined by the Code to mean any official procedure, situation or decision taken by the employee causing a conflict of interest between his personal Financial Fraud Law activities and the government interests. In particular, the Code provides The Financial Fraud Law came into force on 31 December 2009. The provi- as follows: sions of this law are applicable to any person who is convicted of a crime in • the public servant shall not undertake any actions or tasks which are Dubai in relation to improperly obtaining public funds or illicit monies (or likely to give an impression of the existence of conflict of interest; both). The aim of the Financial Fraud Law is to impose tougher sentences • neither the public servant nor any relative up to the fourth degree shall for financial crimes but simultaneously to be set aside upon repayment of accept any gifts, hospitalities, or services from any person if it results funds. The Financial Fraud Law identifies two punishable acts: in any obligation, if it has a direct or indirect effect on his objectivity in • the receipt of illicit monies (monies earned whether directly or indi- implementing his duties, if it might affect his decisions, or if it might rectly as a result of an action which constitutes a punishable crime); and make him subject to obligations in consideration of what he accepted; • the receipt of public funds (funds owned by the government, govern- • the public servant shall not participate in any official operation or deci- ment authorities or institutions or companies owned by the govern- sion which directly or indirectly affects the awarding of any procure- ment or government authorities or in which they hold shares). ment contract to any contractor or supplier related to him up to the fourth degree; The Financial Fraud Law also allows for the release of those convicted • the public servant shall not take part in any official operation or deci- once the illegally obtained funds are returned or settlement agreements sion which is likely to cause the granting of any benefits, lands or are concluded. In furtherance of this aim, the Financial Fraud Law allows licences to any of his relatives up to the fourth degree; accused persons access to all necessary external communications to facili- • the public servant shall not be involved in any operation or decision tate the settlement of illicit monies or to reach a settlement with creditors. which might directly or indirectly affect the success of any supplier, contractor or business enterprise through obtaining a percentage, Federal Human Resources Law share or any material interest; and The Federal Human Resources Law governs most aspects of public service • the public servant must not use his position to promote any product or employment with the federal government of the UAE. service which does not form a part of the function of his employment The Federal Human Resources Law sets forth specific provisions con- contract, or reveal any information which he gains in the course of per- cerning the personal conduct of federal government employees generally, forming the duties of his position to attain certain goals or obtain any and more specifically in relation to gifts, bribes and conflicts of interest. benefit or special consideration from any person. In addition to the federal law, local government employees are subject to local counterparts of the Federal Human Resources Law. For example, 23 Prohibitions employees of the Dubai government are governed by the provisions of the Does the law prohibit both the paying and receiving of a bribe? Dubai Human Resources Management Law No. 27 of 2006 (the Dubai Human Resources Law). Generally, while not described below, the bribery As already mentioned in question 22, the Federal Penal Code and the and conflict of interest provisions of local government human resources Dubai Penal Code make punishable both the act of receiving a bribe as well www.gettingthedealthrough.com 221 UNITED ARAB EMIRATES Afridi & Angell as paying a bribe. The Federal Penal Code also provides for punishment of any commercial transaction with the federation’s government or the UAE any individual who acts as an intermediary in the giving or receiving of the governments, or hold more than one official position in a UAE government. bribe. However, under the Federal Penal Code, the briber or the mediator is exempted from such punishments if the briber or the mediator informs The Federal Human Resources Law the judicial or the administrative authorities of the crime without delay, or The Federal Human Resources Law sets forth specific provisions concern- if he confesses it before the case is communicated to the court. If confes- ing the personal conduct of federal government employees generally, and sion is made after the case is communicated to court, it is considered an more specifically in relation to gifts, bribes and conflicts of interest. extenuating excuse. Further, government employees are subject to prohibitions on per- forming any work or conducting any business other than that prescribed 24 Public officials by official duties. How does your law define a public official and does that Article 66 of the Federal Human Resources Law provides a series of definition include employees of state-owned or state- rules to guide employee conduct. Among these general rules are the fol- controlled companies? lowing: to exercise professional functions in good faith; to adhere to the highest ethical standards; and not to exploit information obtained in the Turning first to the Federal Penal Code, the term ‘public official’ is not course of professional duties. defined but the term ‘public service employees’ is defined as follows: Article 70 of the Federal Human Resources Law provides that an • individuals who are entrusted with public authority and employees employee shall not accept gifts unless they are symbolic advertising or working in ministries and government departments; promotional gifts and bear the name and emblem of the entity on behalf • members of the armed forces; of whom the gift was presented. The article adds that each ministry shall • heads and members of legislative, advisory and municipal councils; define the organisational unit permitted to accept gifts on its behalf for • any individual authorised by any of the public authorities to perform a distribution in accordance with the regulations and standards adopted by job within the limits of the job assigned to him; the ministry. • chairmen of the boards, members, directors and all the staff of public Article 70 goes on to state that an employee shall not distribute gifts bodies and institutions; and received from outside the government except under the name of the min- • chairmen of the boards, members, directors and all the staff of public istry and gifts shall only be distributed through the organisational unit societies and public welfare institutions. approved to do so by the ministry. Article 71 of the Federal Human Resources Law provides that an The Federal Penal Code further provides that, as entrusted with a public employee shall in the course of performing his or her duties avoid any service, any individual who does not belong to any of the above categories conflict of interest that may occur (or been seen to occur) between his or and performs a job relating to public service by virtue of a mandate given her interests and those of the government. The article provides that the to him by a public officer who is authorised to do so by the laws and regula- employee must particularly avoid: tions within the limits of the job assigned to him is also considered a public • participating in a formal decision or operation that may directly or service employee or public official. indirectly affect the success of a contractor or supplier with whom the Turning to the Dubai Penal Code, the term ‘public official’ is not employee has a relationship; defined, but the term ‘persons employed with public service or public • participating in any formal decision or operation that might directly servant’ is defined as any person holding any of the following offices or or indirectly affect the ability of a supplier or contractor or a project performing the duty thereof, whether as deputy or otherwise and whether to which the employee is a partner in any form to obtain a share or a with pay or without it: percentage or a material benefit; • any office of any kind, the power of appointing a person to which or • participating in any decision that might lead to granting of benefits or of removing from which is vested in the ruler or in any government any lands or permits to any of his relatives; and department of the ruler or in any committee or council appointed by • exploiting his career or divulging any information obtained by his the ruler or by his order or under or in pursuance of any law; work to achieve certain objectives or to obtain a service or special • any office to which a person is appointed or nominated by law; treatment from any party. • any civil office, the power of appointing to which or removing from which is vested in any person or persons holding an office of any kind, Article 72 of the Federal Human Resources Law prohibits a non-national included in either of the two prior bullet points; employee of a federal government ministry from having any employment • any office of any kind, the power of appointing a person to which or of outside that ministry under any circumstances without the prior written removing from which is vested in the Trucial States Council or in any consent of the ministry. Non-national employees are further prohibited department or other organisation thereof; or from owning shares in companies other than public shareholding com- • any office of arbitrator or umpire in any proceeding or matter sub- panies, without the prior written consent of ministry for which he or she mitted to arbitration by order or with the sanction of any court, or in works. pursuance of any law, and the said term further includes: • any person employed to execute any process of a court; Federal Law No. 4 of 1998 • all persons employed in any department of the Municipal Council; Federal Law No. 4 of 1998, as amended by Federal Law No. 9 of 2008, gov- and erns a wide range of matters relating to the diplomatic and consular corps • a person acting as a minister of religion of whatever denomina- of the UAE. Included among these matters are conflict-of-interest rules. tion insofar as he perform functions in respect of the notification Article 45 prohibits members of the federal diplomatic and consular of intending marriage or in respect of solemnisation of marriage, corps from having any interest in any works or contracts related to the or in respect of making or keeping of any register or certificate function of the Federal Ministry or office of which the diplomat or consul is of marriage, birth, baptism, death, or burial, but not in any other a member. The said article also restricts such members from carrying out respect. business in favour of third parties with or without salary even after official working hours, unless by permission of the minister. The above definitions in the Federal Penal Code and the Dubai Penal Code would cover employees of state-owned or state-controlled companies. Federal Law No. 6 of 2004 Federal Law No. 6 of 2004 (the Federal Armed Forces Law) concerns the 25 Public official participation in commercial activities service of officers in the armed forces. The law contains certain express Can a public official participate in commercial activities while provisions relating to the conduct of armed forces personnel with regard to serving as a public official? conflicts of interest and gifts. Article 47 of the Federal Armed Forces Law prohibits an officer from The UAE Constitution undertaking work for third parties under any circumstances without the Article 62 of the UAE Constitution provides that during the term of office, permission of the chief of staff. the Prime Minister, his or her representatives or any federal minister may Article 48 of the Federal Armed Forces Law prohibits an officer from not exercise any professional, commercial or finance business, or engage in having any interest, whether personally or through an intermediary, in any
222 Getting the Deal Through – Anti-Corruption Regulation 2015 Afridi & Angell UNITED ARAB EMIRATES works or contracts related to the armed forces with the exception to lease travel expenses, meals or entertainment can be offered to or received by of property owned by him. domestic officials.
Federal Law No. 7 of 2004 27 Gifts and gratuities Federal Law No. 7 concerns the service of enlisted personnel in the armed Are certain types of gifts and gratuities permissible under your forces. This law prohibits the submission of bids on armed forces’ tenders domestic bribery laws and, if so, what types? by members of the armed forces, the awarding of contracts to members of the armed forces and the purchasing of items from members of the armed The Federal Human Resources Law and the Dubai Human Resources Law forces. both prohibit any government employee from accepting any gifts unless Article 47 of this law prohibits an officer from accepting gifts of any sort they are symbolic advertising or promotional gifts and bear the name of whatsoever, whether directly or indirectly. No exceptions are specified. the emblem of the entity presenting them. The ministry can, however, The term ‘armed forces’ means the armed forces of the United Arab specify the organisational units which are allowed to accept such gifts and Emirates. The term ‘officer’ means any military rank holder under the government employees are allowed to accept gifts made in the name of the provisions of the law. concerned ministry. A public official is further prohibited from making or distributing gifts except under the name of the ministry and the organisa- Decision No. 12 of 1986 tional unit approved by the ministry. Decision No. 12 of 1986 of the deputy supreme commander of the armed forces prohibits a member of the armed forces from a direct or indirect 28 Private commercial bribery interest in any works, agreements or contracts relating to the armed forces, Does your country also prohibit private commercial bribery? with the exception of building tenancy contracts. The regulations also pro- hibit members of the armed forces from submitting bids on armed forces’ Yes. See article 236 of the Federal Penal Code discussed in question 22. tenders. 29 Penalties and enforcement Ministerial Resolution No. 20 of 2000 What are the sanctions for individuals and companies violating Ministerial Resolution No. 20 of 2000, also known as the Federal Tenders the domestic bribery rules? Regulation, promulgated regulations restricting ministry employees from having an interest in contracts formed with the government departments Federal Penal Code of the UAE. Article 234: An offence under this article is punishable by temporary impris- Article 11 of the Federal Tenders Regulation prohibits an employee of a onment. Where the commission or the omission of the act is a legitimate UAE ministry from having a direct or indirect interest in contracting works duty of the public officer or person to whom a public service is assigned, or contracts pertaining to the ministry in which the employee is employed. the penalty shall be imprisonment for a period not exceeding 10 years. The provisions of the present article shall apply even if the intent of the said Dubai Law No. 6 of 1997 public officer or individual entrusted with a public service was in fact to Dubai Law No. 6 concerns the rules and procedures regarding contracts refrain from committing or omitting the act. formed with government departments of the emirate of Dubai. Article 235: An offence under this article is punishable by imprison- Contracts to which the requirements of the law apply are: those con- ment for a period not exceeding 10 years. If the commission or omission tracts ensuing expenses on a department and which are entered into for is a duty which the public officer or individual to whom a public service is the supply of materials, the execution of works, or the provision of various assigned is supposed to perform as part of his function, the penalty shall types of services; or those contracts which are entered into for the genera- be confinement. tion of revenue to the department and which are entered into for selling or Article 236: An offence under this article is punishable by imprison- leasing moveable or immoveable assets, or any other contracts generating ment for a period not exceeding five years. revenue. Article 236 (repeated): An offence in connection with a board of direc- Any person who enters into a contract with a government department tors or manager or employee under this article is punishable by imprison- must not be an employee of the department and must not be related to the ment for a period not exceeding five years. The article further provides that first degree with the officials entrusted with the contracting. the convict shall be punished by the same punishments if the claim, accept- ‘Department’ means any government department including any ance or attainment was in pursuance of the performance or cesssation of government establishment, organisation or authority in the Dubai Emirate. performance of the job or violating his duty obligations and was intending ‘Contract’ means any written text of agreement together with all its to have a reward even without any prior agreement. appendices, as concluded between a department and any other public or Article 237: An offence under this article is punishable by confinement private, natural or artificial person for the supply of materials, the execu- for a period of not more than five years. The article further provides that it tion of works, or the provision of services including materials purchas- is punishable by confinement for a period of not more than five years for ing orders and assignment orders issued for works and services on their any person who has acted as a mediator between the briber or the receiver acceptance. in the offering, soliciting, accepting, receiving or promising of bribery. Article 237 (repeated): An offence where any individual who claims Dubai Human Resources Law or accepted for himself or for others any gift, privilege or benefit of any In addition to the federal law, local government employees are subject to sort whatsoever for his interference or the use of his power before a public local counterparts of the Federal Human Resources Law. For example, officer to do or stop doing a job or to violate his duty obligations, is punish- employees of the Dubai government are governed by the provisions of able by confinement for a period of not less than one year and by fine of not the Dubai Human Resources Law. Generally, the bribery and conflict of less than 10,000 dirhams. interest provisions of local government human resources law differ more Article 238: This article provides that the offender shall, in all the cases in scope (ie, they affect only local government employees rather than fed- mentioned in the preceding paragraphs, be punished with a fine equiva- eral employees) than substance from the provisions of the Federal Human lent to what he solicited or accepted, provided that it shall not be less than Resources Law. 1,000 dirhams. Furthermore, the donation accepted by or offered to the public officer or the individual to whom a public service is assigned shall 26 Travel and entertainment be confiscated. Article 239: This article provides that the briber or the mediator shall Describe any restrictions on providing domestic officials be exempted if he informs, without delay, the judicial or administrative with gifts, travel expenses, meals or entertainment. Do the authorities of the crime or if he confesses to it before the case is committed restrictions apply to both the providing and receiving of such to court. If confession is made after the case is communicated to court, it benefits? shall be considered an attenuating excuse. Given the position in the Federal Penal Code, the Dubai Penal Code, the Federal Human Resources Law and the Dubai Human Resources Law with respect to bribes, gifts and conflicts of interest, we do not believe that gifts, www.gettingthedealthrough.com 223 UNITED ARAB EMIRATES Afridi & Angell
penal cases. The Prison Administration shall provide the proper communi- Update and trends cation facilities between the convicted person and others in order to settle the illicit monies or to reach a settlement with the creditors. Although no new significant prosecutions were initiated, the UAE Article 5 provides that without prejudice to any other penalty to which continued with its efforts to reduce corruption and to prosecute the the debtor is sentenced under any other law, the convicted person shall be same when it is detected. released before the expiry of the imprisonment term if the amounts are settled or if a settlement is reached with the creditor. Article 6 provides that if the debtor is a legal entity, the imprisonment Dubai Penal Code order shall be issued against the person to whom the failure to pay back the Article 118 provides for imprisonment for a term not exceeding three years, debt is attributed. or a fine not exceeding 5,000 riyals, or both. Article 119 provides for imprisonment for not more than three years or 30 Facilitating payments to a fine not exceeding 5,000 riyals, or to both. Have the domestic bribery laws been enforced with respect to Article 120 provides for imprisonment for a term not exceeding two facilitating or ‘grease’ payments? years or to a fine not exceeding 3,000 riyals or to both. Article 121 provides for imprisonment for a period not exceeding one There are no known instances. However, see question 31. year, or to a fine not exceeding 1,000 riyals, or to both. Article 122 provides for imprisonment for a term not exceeding one 31 Recent decisions and investigations year or to a fine not exceeding 1,000 riyals or to both. Identify and summarise recent landmark decisions and (Reference to ‘riyals’ should be read as UAE dirhams.) investigations involving domestic bribery laws, including any investigations or decisions involving foreign companies. The Financial Fraud Law Article 2 provides that if it is established through a final and conclusive The past year has witnessed several cases involving allegations of corrup- judgment that the convicted person (debtor) collected illicit monies and tion and bribery. failed to settle the same for whatever reason, the judge shall issue an order Pharmaceutical company GlaxoSmithKline (GSK) is currently investi- upon request by the (creditor) to imprison the convicted person for the gating allegations of corruption in the United Arab Emirates, triggered by following periods: an email from a whistle-blower purporting to be a GSK sales manager for • imprisonment for five years if the illicit monies required to be set- the Gulf region, to its top management, alleging the making of improper tled are not less than 500,000 dirhams and not more than 1 million payments to health-care professionals, hospitals, clinics and pharmacies dirhams; to secure business. • imprisonment for 10 years if the illicit monies required to be settled are Earlier this year, a French expat was reported by an immigration office not less than 1 million dirhams and not more than 5 million dirhams; for trying to bribe the immigration officer 30,000 dirham to flee to Europe • imprisonment for 15 years if the illicit monies required to be settled are without his passport, which he had handed to the authorities in exchange not less than 5 million dirhams and not more than 10 million dirhams; for his release from custody in a separate ongoing cheque bouncing case. or The Federal Court of First Instance in Abu Dhabi sentenced the expat after • imprisonment for 20 years if the illicit monies required to be settled finding him guilty of offering a bribe. are more than 10 million dirhams. In another reported matter, the public prosecution dealing with finance violations has referred an employee of the Abu Dhabi Distribution Article 3 provides that if it is established through a final and conclusive Company (the electricity utility in Abu Dhabi, ADDC) to court to stand trial judgment that the convicted person (debtor) collected public funds and for soliciting a bribe of 10,000 dirham from a building contractor for giv- failed to settle the same for whatever reason, the judge shall issue an order ing a power connection to a number of villas in Abu Dhabi. The complaint upon a request by the (creditor) to imprison the convicted person according was lodged by the contractor himself who said the connection order had to the periods and amounts set out in article 2 of the Financial Fraud Law. already been obtained by him, but the ADDC employee asked the bribe to Article 4 provides that the convicted person (debtor) sentenced under implement the order. the provisions of this law shall be imprisoned away from those convicted in
Charles Laubach [email protected]
Jumeirah Emirates Towers Tel: +971 4 330 3900 Office Tower, Level 35 Fax: +971 4 330 3800 PO Box 9371 www.afridi-angell.com Dubai United Arab Emirates
224 Getting the Deal Through – Anti-Corruption Regulation 2015 Peters & Peters UNITED KINGDOM
United Kingdom
Monty Raphael QC and Neil Swift* Peters & Peters
1 International anti-corruption conventions be committed without the recipient knowing or believing that their per- To which international anti-corruption conventions is your formance would be improper. Section 6 criminalises the act of bribing a foreign public official where country a signatory? a person directly or indirectly offers, promises or gives an advantage to a The United Nations International Convention against Corruption was foreign public official with the intention to influence them in their official signed on 9 December 2003 and ratified on 9 February 2006. UK ratifica- capacity to retain or obtain business or a business advantage. tion extended to the British Virgin Islands in 2006. Section 7 creates a corporate offence of a commercial organisation’s The United Nations Convention against Transnational Organized failure to prevent bribery. The offence is one of strict liability – there is Crime was signed on 14 December 2000 and ratified on 9 February 2006. no need to demonstrate the accused company’s knowledge or authorisa- The OECD Convention on Combating Bribery of Foreign Public tion of the payment in order to establish guilt. The section does contain a Officials in International Business Transactions (OECD Anti-Bribery possible defence that adequate anti-bribery procedures were in place Convention) was signed on 17 December 1997 and ratified on 14 December within the organisation and its commercial relationships. 1998. UK ratification extended to the Isle of Man in 2001. These offences are further discussed in the sections below. The The Council of Europe Criminal Law Convention on Corruption Ministry of Justice published guidance about ‘adequate procedures’ in (Criminal Convention) was signed on 27 January 1999 and subsequently March 2011 which aims to assist organisations to understand the systems ratified on 9 December 2003. The UK made a number of reservations they need to ensure are in place to minimise the risk of bribery by their in accordance with article 37 of the convention; these are available for employees or associates. examination on the Council of Europe’s website. The additional protocol to the Criminal Convention was opened for Previous common law and legislation signature in May 2003. The protocol entered into force on 1 February 2005 The law governing all actions and behaviour prior to 1 July 2011 remains and has been ratified by the UK. The Group of States against Corruption a mixture of the common law bribery offence and a series of statutory (GRECO) is responsible for monitoring the implementation of the conven- offences. The key offences relating to bribery of public officials are- out tion and the additional protocol. lined below. (All legislation referred to in this chapter can be found at www. The Council of Europe Civil Law Convention on Corruption (Civil Law legislation.gov.uk.) Convention) was signed on 8 June 2000 but is not yet ratified. The EU Convention on the Protection of the European Community’s Common law Financial Interests and Protocols entered into force on 17 October 2002, There is a common law offence of bribery that is generally quoted and having been ratified by all member states. accepted to be: The Convention on the Fight against Corruption involving Officials of the European Communities or Officials of Member States of the European The receiving or offering [of ] any undue reward by or to any person Union (Convention on EU Officials) was adopted by the member states on whatsoever, in a public office, in order to influence his behaviour in 26 May 1997 and ratified by the UK in April 1999. office, and incline him to act contrary to the known rules of honesty and integrity. (Russell on Crime, 1964, p381.) 2 Foreign and domestic bribery laws Identify and describe your national laws and regulations The common law offence of bribery is limited to public sector corruption prohibiting bribery of foreign public officials (foreign bribery and depends on the bribee holding a ‘public office’. It is an indictable-only offence with no statutory limit in terms of imprisonment. laws) and domestic public officials (domestic bribery laws). Misconduct in public office is a common law offence triable only on The Bribery Act 2010 came into force on 1 July 2011, sweeping away all that indictment. Public office-holders who act, or fail to act, in a way that consti- came before it. It replaced the statutory and common law regime with two tutes a breach of the duties of that office will commit the offence. The defi- general offences of bribery (giving and receiving), a third specific offence nition of a ‘public officer’ is an evidential point assessed on a case-by-case of bribing a foreign public official and, finally, a new corporate offence basis, taking into account the nature of the role, the duties carried out and the of failing to prevent bribery by not having adequate procedures in place. level of public trust involved. For further information see the CPS Guidance The act is not retrospective; and as such, a working knowledge of the old at https://www.cps.gov.uk/legal/l_to_o/misconduct_in_public_office/. law will be required for the foreseeable future, with many cases likely to straddle both the new and the old regimes. The Public Bodies Corrupt Practices Act 1889 (the 1889 Act) The current law can therefore be found in sections 1, 2, 6 and 7 of the The UK has prosecuted the crime of bribery under the common law Bribery Act. See www.legislation.gov.uk/ukpga/2010/23/contents. (unwritten) for many centuries. The crime of corruption only entered stat- Section 1 creates an offence of ‘active’ bribery with the section engaged ute law (written) in 1889 when Lord Randolph Churchill MP introduced a where a person offers, promises or gives a financial or other advantage to private member’s bill outlawing the bribery of public officials. another person with the intent to induce or reward improper performance The 1889 Act makes the active or passive bribery of a member, officer of a relevant function or activity. or servant of a public body a criminal offence. The act prohibits a person Section 2 created the passive offence where a person requests, agrees covered by the act (see question 22), whether by him or herself, or in con- to receive or accepts financial or other advantage, either intending to junction with any other person, from corruptly soliciting or receiving, or perform improperly, as a reward for so doing or where the request or agreeing to receive, for him or herself, or any other person, any gift, loan, receipt would of itself amount to improper performance. The offence can fee, reward or advantage whatsoever as an inducement to, or reward for, www.gettingthedealthrough.com 225 UNITED KINGDOM Peters & Peters doing or forbearing to do anything in respect of any matter or transaction Foreign bribery whatsoever, actual or proposed, in which the public body is concerned. 3 Legal framework 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 Describe the elements of the law prohibiting bribery of a that person or of another person, as an inducement to or reward for doing foreign public official. or forbearing to do anything in respect of any matter or transaction what- soever, actual or proposed; in which the public body is concerned. The Bribery Act 2010 Both the 1889 and 1906 acts require the defendant to have acted ‘cor- Section 6 of the Bribery Act has introduced a ‘bespoke offence’ of bribing ruptly’, but neither provides a definition. The question of whether dishon- foreign public officials. For the purposes of section 6, ‘a person (P) who esty is required has been the subject of conflicting authorities in the past. bribes a foreign public official (F) is guilty of an offence if P’s intention is The current position, favoured by most recent appellate authorities, is that to influence F in F’s capacity as a foreign public official. P must also intend proof of intent to corrupt is required without needing dishonesty. to obtain or retain business, or an advantage in the conduct of business’. Unlike the general bribery offences in sections 1 and 2, the offence of The Prevention of Corruption Act 1906 (the 1906 Act) bribery of a foreign public official only covers the offering, promising or A report published in 1898 by the Secret Commissions Committee of the giving of bribes, and not the acceptance of them. Also, unlike the general London Chamber of Commerce called for the law of corruption to be offence of bribing another, culpability is not premised on any intention to extended into the private sector. In 1906 a new act was introduced making elicit ‘improper performance’. it a crime to bribe any ‘agent’. An agent is anybody employed by or acting It is important to note that, for the purposes of the general offences for another, whether in the public or private sector. This act makes it an in sections 1 and 2, a function or activity is a ‘relevant function or activity’ offence for: even if it has no connection with the UK, and is performed outside the UK. • an agent to obtain consideration as an inducement or reward for doing Pursuant to section 12 of the act, the offences in sections 1 and 2, as well as any act, or showing favour or disfavour to any person, in relation to his the section 6 bespoke offence, will be committed even if no acts or omis- or her principal’s affairs; sions forming part of the offences take place in the UK, provided a person • any person to give consideration to an agent to induce him or her to do whose acts or omissions constitute the offences has a ‘close connection’ an act in relation to his or her principal’s affairs; or with the UK as defined in section 12(4). • any person or agent to knowingly falsify receipts, accounts or other documents with the intent to deceive the principal. What must a person do in order to commit this offence? The conduct element of the section 6 offence is the direct or indirect offer, The Prevention of Corruption Act 1916 (the 1916 Act) promise or gift by a person (P) of any financial or other advantage to a for- Under the provisions of the 1916 Act, if any person, or agent of a person, eign public official (F) or another person. Where the advantage is offered, holding or seeking to obtain a contract gives a gift to a public official, that promised or given to a person other than F, the offence will only be made gift shall be presumed to be corrupt unless the accused person can prove out if these acts are done at F’s request, assent or acquiescence. Section otherwise. The Law Commission recommended the abolition of the pre- 6(3)(a) makes clear that it is irrelevant whether the offer, promise or gift is sumption and its use has been abandoned by the Crown Prosecution made directly to the official or through a third party. Service (CPS), given concerns about its compliance with the Human Rights In addition, the written law applicable to F must not permit or require Act 1998, which incorporates the European Convention of Human Rights him to be influenced in his capacity as a foreign public official by the offer, into UK domestic law. The government has previously stated that it would promise or gift. Where the performance of F’s functions would not be sub- repeal this law but has yet to do so. In its most recent consultation, the Law ject to the law of a part of the UK, the ‘written law’ is either the applicable Commission also questioned whether such a presumption is necessary or rules of the appropriate public international organisation, or the law of the desirable. country or territory in relation to which F is a foreign public official as con- The definition of a public body was amended by the 1916 Act to tained in its written constitution, provision made by or under legislation or include: ‘local and public authorities of all descriptions’ (section 4(2)). judicial decisions that are evidenced in writing. The Law Commission had originally proposed a defence for any per- The Anti-Terrorism, Crime and Security Act 2001 son who mistakenly, but reasonably, believed that a foreign public official The Anti-Terrorism, Crime and Security Act 2001 introduced new provi- was required or permitted to accept an advantage under the official’s local sions to give UK courts jurisdiction over crimes committed abroad by UK law. The government decided not to include this defence in the act follow- nationals and UK companies. Part 12 extended the laws against bribery to ing objections from the OECD. Its Working Group considered that such a cases where the ‘functions of the person who receives or is offered a reward defence would be open to abuse and would contradict the general stance have no connection with the United Kingdom and are carried out in a coun- of the UK legal system, under which mistake of the law is no excuse. The try or territory outside the United Kingdom’. It extended the laws against OECD’s legal director, Nicola Bonucci, highlighted the danger of abuse corruption to make prosecutions possible for ‘acts [that] would, if done in by stating ‘it is not difficult […] to get bad legal advice if you want it’. The the United Kingdom, constitute a corruption offence’. In summary: Secretary of State for Justice stated that removing the defence represented • section 108 renders it immaterial for the purposes of any offence of the ‘correct balance’ between being fair to defendants and providing ‘so bribery (whether by virtue of the common law or by statute) if the func- many rabbit holes’ that they could unduly escape conviction. He high- tions of the person who receives or is offered a reward have no connec- lighted that prosecutorial discretion and the good sense of jurors could be tion with the UK and are carried out in a country or territory outside trusted to ensure that genuine mistakes were not punished by conviction. the UK; and • section 109 applies where a UK national or a body incorporated under What must a person ‘intend’ in order to commit this offence? the law of any part of the UK does anything in a country or territory There are two fault elements to the offence. First, P must intend to influ- outside the UK, and the act would, if done in the UK, constitute a cor- ence F in his capacity as a foreign public official. This means influencing F ruption offence (whether by virtue of the common law, or by statute). in the performance of his functions as an official, including any omissions In such a case, the act constitutes the offence concerned and proceed- to exercise those functions and any use of F’s position outside of his lawful ings for the offence may be taken in the UK. authority. Second, P must also intend to obtain or retain business or an advan- It is noteworthy that Part 12 was intended to be a temporary measure, tage in the conduct of business. Subsection 8 clarifies that the term ‘busi- pending the introduction of comprehensive corruption legislation. ness’ includes a trade or profession.
Other legislation For actions prior to 1 July 2011 the framework outlined in question 2 applies. Part 12 of the Anti-Terrorism, Crime and Security Act 2001 extends the scope of the UK law on bribery to ‘foreign’ bribery. It does this by providing that the existing bribery offences apply to conduct by UK nationals or com- panies which takes place outside the UK or involves either foreign agents
226 Getting the Deal Through – Anti-Corruption Regulation 2015 Peters & Peters UNITED KINGDOM or principals having no connection to the UK or holders of a foreign public Public Prosecutions (DPP) on the Bribery Act 2010. Where relevant, the office or officials of foreign bodies or authorities where the UK equivalent Joint Guidance on Corporate Prosecutions will also be applied. would be covered by the domestic offence. In other respects the elements If on the evidence there is a realistic prospect of conviction, the SFO of the offences remain unchanged; the act makes it clear, however, that the will prosecute if it is in the public interest to do so. In appropriate cases the existing presumption of corruption in respect of the statutory offences is SFO may use its powers under proceeds of crime legislation as an alterna- not correspondingly extended. tive (or in addition) to prosecution; see the Attorney General’s guidance to prosecuting bodies on their asset recovery powers under the Proceeds of 4 Definition of a foreign public official Crime Act 2002 (POCA). The director of the SFO, David Green QC, has previously said in an How does your law define a foreign public official? interview with a national newspaper in November 2012: Section 6(5) of the Bribery Act defines a ‘foreign public official’ as an indi- vidual who holds a legislative, administrative or judicial position, whether I am sceptical of guidance notes. I suspect the motives of those that want appointed or elected; or who exercises a public function for or on behalf of absolutely precise guidance, because I suspect they want to wait round a foreign country; or who exercises a public function for a public agency or the corner and hit you over the head with it, and say, you are acting con- enterprise in a foreign country. trary to your guidance. The criminal law covers an endless multitude The definition also covers officials or agents of public international of possibilities and possible sets of facts. It is very hard to be specific. On organisations, meaning organisations whose members are any of the corporate hospitality, it rather depends on the motive and the context following: and the timing and the value. You can’t just say, Wimbledon tickets are • countries or territories; OK. They’ll say that you said, ‘Wimbledon tickets are all right’. • governments of countries or territories; • other public international organisations; or The Ministry of Justice published statutory Guidance to the Bribery Act • a mixture of any of the above. 2010 in March 2011 pursuant to section 9 of the Act. About hospitality, it states: Under the old regime, when the corruption law was extended in 2001 to criminalise the bribery of foreign public officials (on the basis of nation- […] in cases where hospitality, promotional expenditure or facilitation ality), the legislation added a ‘foreign’ component to existing definitions payments do, on their face, trigger the provisions of the Act prosecutors of ‘agent’, ‘principal’, ‘public office’, ‘public body’ and ‘public authorities’. will consider very carefully what is in the public interest before decid- The expression ‘public body’ means any council of a county or city or ing whether to prosecute. town, any council of a municipal borough, also any board of commission- ers, select vestry or other body which has power to act under and for the The Joint Prosecution Guidance of the director of the SFO and the DPP, purposes of any act relating to local government or the public health or to also issued in March 2011, states that: poor law or otherwise to administer money raised by rates in pursuance The more lavish the hospitality or expenditure (beyond what may be of any public general act and includes any body which exists in a country reasonable standards in the particular circumstances) the greater the infer- or territory outside the UK and is equivalent to any body described above. ence that it is intended to encourage or reward improper performance or In the 1916 Act and in the Public Bodies Corrupt Practices Act 1889, the influence an official. Lavishness is just one factor that may be taken into expression ‘public body’ included, in addition to the bodies mentioned account in determining whether an offence has been committed. The full in the last-mentioned act, local and public authorities of all descriptions, circumstances of each case would need to be considered. Other factors including authorities existing in a country or territory outside the UK. might include that the hospitality or expenditure was not clearly connected The expression ‘public office’ means any office or employment of a with legitimate business activity or was concealed. person as a member, officer or servant of such public body. This guidance provides that the following public interest factors tend- The expression ‘agent’ includes any person employed by or acting for ing in favour of and against prosecution are likely to be relevant. another; and the expression ‘principal’ includes an employer. Further, a Factors tending in favour of prosecution are: person serving under the Crown or under any corporation or any borough, • a conviction for bribery is likely to attract a significant sentence; county or district council or any board of guardians is an agent within the • offences will often be premeditated and may include an element of meaning of the 1906 Act. corruption of the person bribed; • offences may be committed in order to facilitate more serious offend- 5 Travel and entertainment restrictions ing; and • those involved in bribery may be in positions of authority or trust and To what extent do your anti-bribery laws restrict providing take advantage of that position. foreign officials with gifts, travel expenses, meals or entertainment? Factors tending against prosecution are: We have no specific legislation or rules regarding the giving of gifts, travel • the court is likely to impose only a nominal penalty; expenses, meals or entertainment to foreign officials. Most UK companies • the harm can be described as minor and was the result of a single would have a zero-tolerance policy or a policy restricted to no gifts, modest incident; and and necessary travel expenses for the official only (ie, no family or entou- • there has been a genuinely proactive approach involving self-reporting rage), modest shared meals and no entertainment. and remedial action. The Bribery Act 2010 does not prohibit bona fide hospitality and pro- motional expenditure that is proportionate and reasonable and under- See www.justice.gov.uk/downloads/guidance/making-reviewing-law/ taken in good faith, but there may be instances where such expenditure bribery-act-2010-guidance.pdf and www.sfo.gov.uk/media/167348/brib- could form the basis of offences under sections 1, 6 and 7. ery%20act%20joint%20prosecution%20guidance.pdf. The government and the Serious Fraud Office (SFO) have openly rec- ognised that corporate hospitality is an accepted part of modern business 6 Facilitating payments practice and made plain that they are not seeking to penalise expenditure Do the laws and regulations permit facilitating or ‘grease’ on corporate hospitality for legitimate commercial purposes. However, as payments? lavish corporate hospitality can also be used as a bribe to secure advan- tages, the offences in the act must be capable of penalising those who use A ‘facilitation payment’ refers to the practice of paying a small sum of it for such purposes. money to a public official (or other person) as a way of ensuring that they Guidance relating to business expenditure was issued by the SFO in perform their duty, either more promptly or at all. October 2012. Whether the SFO will prosecute in respect of a bribe presented as hos- The current position pitality or some other apparently promotional business expenditure will be Facilitation payments have always been unlawful in the UK: no regime, be governed by the Full Code Test in the Code for Crown Prosecutors and the it statutory or founded in the common law, has distinguished them from Joint Prosecution Guidance of the Director of the SFO and the Director of any other form of bribery. www.gettingthedealthrough.com 227 UNITED KINGDOM Peters & Peters
The UK government has publicly stated that it is difficult to envis- Factors tending against prosecution age circumstances in which the making of a small facilitation payment, A single small payment likely to result in only a nominal penalty. extorted by a foreign official in countries where this is normal practice, The payment(s) came to light as a result of a genuinely proactive would of itself give rise to a prosecution in the UK. The Law Commission approach involving self-reporting and remedial action. reiterated in the consultation paper that the government has made clear Where a commercial organisation has a clear and appropriate policy that, although committed to facilitation payments remaining criminal, it setting out procedures an individual should follow if facilitation payments is unlikely that the making of such payments would result in prosecution. are requested and these have been correctly followed. However, the SFO guidance issued in October 2012 was far more vague The payer was in a vulnerable position arising from the circumstances about the prosecution of facilitation payments: in which the payment was demanded. Whether the SFO prosecutes in relation to facilitation payments will always depend on whether it is a serious or complex case which falls within 7 Payments through intermediaries or third parties the SFO’s remit and, if so, whether the SFO concludes, applying the Full In what circumstances do the laws prohibit payments through Code Test in the Code for Crown Prosecutors, that there is an offender that intermediaries or third parties to foreign public officials? should be prosecuted. If the requirements of the Full Code Test are not established, the SFO Sections 1(5) and 6(3) of the Bribery Act unambiguously state that it does may consider civil recovery as an alternative to a prosecution. not matter whether an advantage is offered, promised or given by P directly or through a third party for the purposes of the sections 1 and 6 offences. The Law Commission’s recommendations Section 7 creates a responsibility for companies to ensure that third parties In its final report, the commission reiterated that it is generally agreed and intermediaries, such as joint venture partners, approved local agents that, on broad social grounds, a culture in which facilitation payments are or suppliers, are fully aware of their anti-bribery and corruption policies. regular and accepted is undesirable and that such payments should be dis- Otherwise the adequate procedures defence will not be available to them couraged. The commission went on to recognise ‘degrees of desirability’, where a third party or intermediary offered bribes on their behalf. identifying situations in which, for example, a payment is made as a mat- The report of the OECD Working Group on Bribery on the UK’s ter of local courtesy, as situations unlikely to engage the new provisions. Implementation of the OECD Anti-Bribery Convention raised a concern Examples of situations that would be covered, although not necessarily that bribes paid through an intermediary were not covered by the old law. prosecuted, include: The 1906 Act and the body of case law creating the common law offence, • where the official, if not paid, either will not fulfil the duty at all or will and therefore the law that governs any action before 1 July 2011, do not do so only after a seriously damaging delay; expressly refer to an offer, etc, being made through an intermediary. • where the official generally fulfils the relevant duties correctly, but Under the offence in the 1906 Act, a person who gives or offers, etc, accepts payment for dealing with a particular matter with exceptional a bribe to a foreign public official with the assistance of an intermediary despatch or effort; and would be guilty of an offence as well as the intermediary because the • where the official fulfils the relevant duties correctly, but a payment offence is aimed at any person who corruptly ‘gives or agrees to give or made is part of his or her reason for so doing. offers any gift or consideration to any agent’. The use of an agent (innocent or otherwise) by an offender will not The Joint Committee’s observations allow the offender to escape criminal liability. The wide ambit of section 1 The Joint Committee agreed with the government that facilitation pay- of the 1906 Act is demonstrated by the passive provisions, which explicitly ments should continue to be criminalised. A specific defence, they said, state ‘for himself or for any other person’. risks legitimising corruption at the thin end of the wedge. At the same In its final report the Law Commission noted the SFO’s comments time the committee recognised that business needs clarity about the cir- that cases of bribery where payments are made through intermediaries are cumstances in which facilitation payments will be prosecuted, particularly frequent and difficult to investigate and prosecute. The SFO also empha- given the difficult situations that can arise. Therefore, the basic principles sised that it should make no difference that the beneficiary of the corrupt of prosecution policy, which the committee expected to adhere firmly to transaction is a third party, which could be commonplace where multi- the concept of proportionality, must be made clear. In so concluding, the ple companies are involved. It could be suggested that there has been an committee noted that: attempt to address these in the width of drafting of the section 7 offence of the Bribery Act where commercial organisations can be guilty of failure to [T]here are undoubtedly difficult and unanswered dilemmas facing prevent bribery where action has been taken that fulfils the requirements business, as Lord Robertson illustrated: ‘stevedores on the docks of a of the section 1 or 6 offences (bribing and specifically bribery of a foreign country say they will not unload your ship unless a payment is made public official) by an associated person who need have no close connection to their union or to their corporate organisation, what do you do? You to the UK nor be a British citizen of company or any type. say, “No. We will just let our ships lie there”[?] 8 Individual and corporate liability The parliamentary passage of the act saw considerable debate on the issue Can both individuals and companies be held liable for bribery of facilitation payments. A full exploration is outside of the scope of this of a foreign official? publication. The Ministry of Justice guidance notes that facilitation pay- ments could trigger either the section 6 offence or, where there is an inten- Subject to certain exemptions below, both companies and individuals tion to induce improper conduct, including where the acceptance of such may be liable for bribery of a foreign official under the current law and the payments is itself improper, the section 1 offence, and therefore potential Bribery Act. liability under section 7. The Queen, foreign sovereigns or heads of state, their families and The prosecution guidance issued by the director of the SFO and the their private servants are all immune from criminal jurisdiction by virtue director of public prosecutions lists the following public interest factors of the State Immunity Act 1978. Furthermore, the Diplomatic Privileges tending in favour of and against prosecution. Act 1964 gives immunity to diplomatic agents, members of the staff of a diplomatic mission and their families. Factors tending in favour of prosecution In 2004, a private application for an extradition warrant against Large or repeated payments are more likely to attract a significant sentence. President Robert Mugabe was refused by the Bow Street Magistrates’ Facilitation payments that are planned for or accepted as part of a stand- Court. That court stated that ‘while international law evolves over a period ard way of conducting business may indicate the offence was premeditated. of time, international customary law, which is embodied in our common Payments may indicate an element of active corruption of the official law, currently provides absolute immunity to any head of state’. in the way the offence was committed. For a discussion of the application of the immunity provisions for for- Where a commercial organisation has a clear and appropriate policy mer heads of state, see the House of Lords’ decision in Ex parte Pinochet setting out procedures an individual should follow if facilitation payments Ugarte (No. 3) [1999] 2 All ER 97. are requested and these have not been correctly followed.
228 Getting the Deal Through – Anti-Corruption Regulation 2015 Peters & Peters UNITED KINGDOM
The current position has been tasked with reconsidering the whole law of corporate criminal Section 7 creates a novel offence of failing to prevent bribery which can liability. only be committed by a ‘relevant commercial organisation’, an umbrella term that encompasses bodies incorporated in the UK, together with part- 9 Civil and criminal enforcement nerships formed under UK law, irrespective of where business is carried Is there civil and criminal enforcement of your country’s out, and bodies and partnerships, wherever formed or incorporated, who foreign bribery laws? conduct business in the UK. The offence is committed where a person (A) who is associated with the commercial organisation (C) bribes another For criminal enforcement please see questions 3 and 16. person with the intention of obtaining or retaining business or an advan- Victims of bribery, for example, businesses whose employees have tage in the conduct of business for C. been bribed, may have a cause of action to recover damages from both the ‘Bribery’ in the context of this offence relates only to the offering, briber and the bribee. Until, or if, there is a prosecution under the Bribery promising or giving of a bribe contrary to sections 1 and 6 (there is no corre- Act, it is uncertain as to whether unsuccessful competitor businesses will sponding offence of failure to prevent the taking of bribes). Applying ordi- try to seek financial redress for loss caused by uncompetitive and corrupt nary principles of criminal law, the reference to offences under sections business practices. 1 and 6 include being liable for such offences by way of aiding, abetting, Under POCA an individual may have the proceeds of his or her crimi- counselling or procuring (secondary liability). Subsection (3) also makes nal offending removed under a Civil Recovery Order. Part 5 of POCA ena- clear that there is no need for the prosecution to show that the person who bles the major UK prosecuting agencies to issue proceedings in the High committed the bribery offence has already been successfully prosecuted. Court against any person who it thinks holds property which is, or repre- The prosecution must, however, show that the person would be guilty of sents, property obtained through unlawful conduct. the offence were that person to be prosecuted or capable of being prose- cuted under this act. Subsection (3)(b) makes clear that there is no need for 10 Agency enforcement A to have a close connection to the UK as defined in section 12; rather, so What government agencies enforce the foreign bribery laws long as C falls within the definition of ‘relevant commercial organisation’, and regulations? that should be enough to provide courts in the UK with jurisdiction. Section 12(5) clarifies that for the purposes of the offence in section 7 it The SFO has been designated the lead agency in the handling of foreign is immaterial where the conduct element of the offence occurs. bribery allegations and investigations. It was established in 1988 with the Section 7(2) provides that it is a defence for the commercial organisa- responsibility for the detection, investigation and prosecution of serious tion to show it had adequate procedures in place to prevent persons associ- fraud. The director of the SFO has the discretion to prosecute Bribery Act ated with C from committing bribery offences. According to the Ministry of offences as per section 10 of the Bribery Act. The DPP as the head of the Justice guidance, the standard of proof which the commercial organisation Crown Prosecution Service (CPS) has this power. Section 10(4) makes clear would need to achieve to discharge the burden of establishing a defence, in that the issue of consent must be exercised by the relevant director person- the event it was prosecuted, is the ‘balance of probabilities’. ally, subject to a narrow exception where the director concerned is unavail- The guidance on ‘adequate procedures’ provides six flexible and out- able. In such circumstances the function may be discharged by another come-focused principles, ‘allowing for the huge variety of circumstances person nominated for this purpose by the relevant director in writing. that commercial organisations find themselves in’. The six principles are: The SFO has the responsibility for assessing each allegation of brib- • proportionate procedures; ery and, if an investigation is merited, allocating cases to the investigative • top-level commitment; agency best suited to deal with it. The Financial Conduct Authority (FCA, • risk assessment; formerly the Financial Services Authority) may refer its intelligence from • due diligence; an investigation to one of the agencies that has the power to prosecute if • communication (including training); and they deem it necessary. • monitoring and review. The City of London Overseas Corruption Unit was created in 2006 as a dedicated team for investigating international corruption, including Section 14 of the act provides that a senior officer or person (as well as the money laundering in the UK by corrupt politicians from developing coun- body corporate or partnership) is guilty of the offence, and liable to be tries and bribery by UK business overseas. proceeded against and punished accordingly, if an offence contrary to sec- tions 1, 2 or 6 is proved to have been committed by a body corporate or a 11 Leniency Scottish partnership with the consent or connivance of: that senior officer Is there a mechanism for companies to disclose violations in of the body corporate or Scottish partnership, or a person purporting to act exchange for lesser penalties? in such a capacity. For a ‘senior officer’ or similar person to be guilty, he or she must have On 9 October 2012, the director of the SFO, David Green QC, published a close connection to the UK, for the meaning of which see section 12(4). It guidance from the SFO on the topics of facilitation payments, business should be noted that the body corporate and the senior manager are both expenditure and self-reporting. This guidance superseded previous SFO guilty of the main bribery offence; this section does not create a separate policy and restates the SFO’s primary purpose. The accompanying note offence of ‘consent or connivance’. Nor does the section apply to the corpo- explained that revised guidance was being published to: rate offence under section 7, and the government has confirmed that there • restate the SFO’s primary role as an investigator and prosecutor of seri- is no possibility of individual liability arising under section 14 where the ous and/or complex fraud, including corruption; section 7 offence has been committed. • ensure there is consistency with the approach of other prosecuting The question of corporate liability for offences under sections 1, 2 and bodies; and 6 would be determined by the application of the ‘identification principle’. • take forward certain OECD recommendations. The principle allows ‘the acts and state of mind’ of those who represent the ‘directing mind and will’ to be imputed to the company. Tesco Supermarkets The SFO’s primary role is to investigate and prosecute. The revised poli- Ltd v Nattrass [1972] AC 153 restricts the application of the ‘identification cies make it clear that there will be no presumption in favour of civil settle- principle’ to the actions of ‘the board of directors, the managing director ments in any circumstances. and perhaps other superior officers who carry out functions of manage- This represents a movement away from the position under the pre- ment and speak and act as the company’. vious director and the guidance published in 2009, which stated that A more detailed assessment of the principles underpinning corporate although there were no guarantees and that every case must be considered criminal liability in the UK is beyond the scope of this work. The Guidance separately, the SFO intended to settle cases where possible if it finds self- on Corporate Prosecutions (issued in December 2009 by the DPP and the reporting and adequate cooperation. director of the SFO, and agreed by the Attorney General) provides the nec- The 2012 Guidance seems to have a slightly different emphasis: essary particulars. It is sufficient to note that the ‘identification principle’ places an exceptionally arduous burden on the prosecution to establish If on the evidence there is a realistic prospect of conviction, the SFO corporate criminal liability where a corruption offence is committed by an will prosecute if it is in the public interest to do so. The fact that a employee of a large, decentralised, corporation. The UK Law Commission corporate body has reported itself will be a relevant consideration to www.gettingthedealthrough.com 229 UNITED KINGDOM Peters & Peters
the extent set out in the Guidance on Corporate Prosecutions. That stage where either the Full Code Test for Crown Prosecutors is satisfied or, Guidance explains that, for a self-report to be taken into considera- if this is not met, that there is at least a reasonable suspicion based upon tion as a public interest factor tending against prosecution, it must some admissible evidence that a company has committed an offence, and form part of a ‘genuinely proactive approach adopted by the corporate there are reasonable grounds for believing that a continued investigation management team when the offending is brought to their notice’. Self- would provide further admissible evidence within a reasonable period of reporting is no guarantee that a prosecution will not follow. Each case time, so that all the evidence together would be capable of establishing a will turn on its own facts. realistic prospect of conviction in accordance with the Full Code Test. The second stage is a public interest test: would the public interest be properly The accompanying notes state ‘the SFO encourages corporate self-report- served by the prosecutor not prosecuting but instead entering into a DPA ing, and will always listen to what a corporate body has to say about its past with the company. conduct; but the SFO offers no guarantee that a prosecution will not follow An invitation to negotiate a DPA is entirely at the prosecutor’s discre- any such report… it is not the role of the SFO to provide corporate bodies tion. If one is considered appropriate, having fulfilled the two-stage test, with advice on their future conduct’. the prosecutor will (where the court approves the DPA) prefer an indict- The notes highlighted that the only change to the DPP–SFO joint ment that will immediately be suspended pending the satisfactory perfor- prosecution guidance was the removal of the SFO’s former policy on mance, or otherwise, of the DPA. self-reporting. The DPA Code further addresses: the factors that may be taken into Under sections 71 to 73 of the Serious Organised Crime and Police Act account by prosecutors when deciding whether to enter into a DPA, includ- 2005 certain ‘specified prosecutors’ have powers to grant immunity from ing additional public interest factors; the process for invitation to enter in prosecution to cooperating offenders; to provide undertakings regarding DPA negotiations; subsequent use of information obtained by a prosecu- use of evidence against cooperating offenders; and to enter into an agree- tor during the DPA negotiation period; disclosure and unused material; the ment for a defendant to provide assistance to the prosecutor in relation to statement of facts and the terms that will be included in the application an offence, with powers given to the courts to take that into account when to the court; monitors; financial penalties; preliminary and final hearings; determining what sentence to pass on the defendant. The ‘specified pros- variation, discontinuance and breach of a DPA; and privacy and publica- ecutors’ for the purposes of the act are: tions of decisions. • the DPP; The Criminal Procedure (Amendment No. 2) Rules 2013 inserted a • the director of the SFO; new Part 12 into the Criminal Procedure Rules governing DPAs, effective • the DPP for Northern Ireland; as of 24 February 2014. The new rules lay out the powers of the court and • the FCA; and how they can be exercised, as well as its duties. Furthermore, it sets out the • the Secretary of State for Business, Innovation & Skills, acting requirements of the prosecutor, and the defence, for: any application that is personally. to be made for the approval of a proposed entrance into a DPA; an applica- tion to approve the terms of an agreement; an application on breach of an 12 Dispute resolution agreement; an application to approve a variation of the terms of an agree- Can enforcement matters be resolved through plea ment; an application to lift suspension of prosecution; and an application to postpone the publication of information by the prosecutor. agreements, settlement agreements, prosecutorial discretion Whether a particular case is appropriate for the use of a DPA will be or similar means without a trial? subject to judicial approval at the preliminary hearing as per paragraph 7 Some recent SFO investigations of overseas corruption have concluded of Schedule 17. The test that will be applied is a two-part test: first whether without a trial by means of plea agreements or civil recovery orders (see allowing the organisation to enter into a DPA would be in the ‘interests of question 16 for the additional use of a civil recovery order in the case of Bruce justice’ and, second, whether the proposed terms are ’fair, reasonable and Hall). Prosecutors may also opt not to pursue certain investigations in the proportionate’. exercise of prosecutorial discretion in accordance with the Code for Crown The preliminary hearing seeking this approval would be conducted in Prosecutors (www.cps.gov.uk/publications/code_for_crown_prosecutors). private to allow the prosecutor and the organisation to lay out the proposed The desire within both government and the Serious Fraud Office for a terms before the court without any fear of jeopardising future prosecu- power to ‘allow prosecutors to hold offending organisations to account for tions. The government has suggested that factors that could be taken into their wrongdoing in a focused way without the uncertainty, expense, com- account by the judiciary at this stage would include whether the investiga- plexity or length of a criminal trial’ has led to the introduction of Deferred tion and subsequent proceedings had arisen from self-reporting, the extent Prosecution Agreements (DPAs) in the Crime and Courts Act 2013, effec- of the dishonest and unlawful behaviour, the impact upon third parties, the tive as of 24 February 2014. Section 45 and Schedule 17 of the act contain financial resources of the company and whether any remedial action has the legislative framework for DPAs. On 14 February 2014, the director been taken. of the SFO and the DPP published a joint code of practice on the use of A finding by the court that a DPA was appropriate in principle would Deferred Prosecution Agreements (DPA Code) required under Schedule not bind the judge to approve the agreement at the final hearing. 17, Part 2, paragraph 6 of the act. The final agreement, once approved, must be declared in open court with full reasoning provided. Once the declaration has been made in open DPAs are to be used to deal with economic crime, particularly inci- court the prosecutor will, unless prevented from doing so by an enactment dences of bribery (specifically offences under the Bribery Act), fraud, or by an order from the court, publish on its website the DPA, the court’s money-laundering and the proceeds of crime, some offences under the declarations and reasoning pursuant to both paragraph 7 and 8 of Schedule Theft Act and other offences relating to economic activity as set out in 17 to the act, or if appropriate, publish the initial refusal of a declaration part 2 of schedule 17. and accompanying reasons. The non-exhaustive contents of a DPA are outlined in paragraph 5 of Individuals will not be eligible for the DPA process, regardless of whether Schedule 17 of the Crime and Courts Act 2013 and the DPA Code. A DPA they have undertaken crimes themselves or actions on behalf of their must contain: organisation. • a start and end date; The government has defined a DPA as ‘a voluntary agreement between • a statement of facts negotiated by the prosecutor and the commercial a prosecutor and a commercial organisation whereby, in return for comply- organisation which may include admissions; and ing with a range of tough and stringent conditions including, for example, • the terms and conditions of the agreement. These would be specific the payment of a substantial penalty, requirements to make reparation to to each instance; however, they would include some or all of the victims and participate in monitoring for a set period, the prosecutor will following: defer a criminal prosecution’. • a financial penalty (this must broadly reflect the fine that a court would Paragraph 2 of the DPA Code sets out a list of circumstances in which have imposed on conviction following a guilty plea); a prosecutor may consider entering into a DPA, the principles applying to • disgorgement of profits or benefit; such decisions and facts that would suggest a DPA to be unsuitable. • compensation to victims; The DPA Code sets out the test to be used when determining whether • charitable or third party donations; entering into a DPA is appropriate: it is a two-stage test: first an evidential • cooperation with investigations;
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• disclosure obligations; • Attorney General’s guidelines on plea discussions in cases of serious or • providing access to documents and witnesses; complex fraud (March 2009); • requirements regarding anti-corruption and anti-fraud policies, • Attorney General’s guidelines on the acceptance of pleas (revised procedures and training; and 2009); and • payment of reasonable costs. • Attorney General’s guidance to prosecuting bodies on their asset recovery powers under the Proceeds of Crime Act 2002 (November Any money received by a prosecutor under a DPA will be paid into the 2009). Consolidated Fund (ie, to the Treasury). Fines will be subject to a reduction of up to one-third based on cooperation and early reporting. 13 Patterns in enforcement Concerns have been raised about the protection of individuals under Describe any recent shifts in the patterns of enforcement of the DPAs, especially as there are no plans to offer individual immunity within foreign bribery rules. the DPA process. This, coupled with the breadth of the proposed access pro- visions, has led to unease about possible prejudice to future proceedings. The number of enforcement actions throughout 2014 have been lower than If, at the end of the deferral period, the prosecutor is satisfied that the previous years as we see regulators and prosecutors looking to harness and organisation has fulfilled its obligations, there would be no prosecution on focus their resources on high profile targets. David Green, director of the the charges laid. If, on the other hand, it was felt that the requirements had SFO, has referred to the current list of investigations as, ‘the most demand- not been met, the option of prosecution would still be available. ing caseload the SFO has ever shouldered’, with a clear focus that foreign The DPA Code is further supported by the Sentencing Council’s bribery is targeted at its highest level. However, while the drive to investi- Definitive Corporate Offender Guidelines on Fraud, Bribery and Money gate top-tier companies is clear, the conviction of Smith & Ouzman Ltd on Laundering published on 23 May 2014 and effective as of 1 October 2014. 22 December 2014 over corrupt payments totalling £395,074 (see question The new guidelines provide specific guidance on appropriate fines for 16 for further detail) sends out a clear warning to small and medium-sized economic offences and a step-by-step guide as to how those fines will be enterprises that they will also continue to face scrutiny. assessed by the court. The guidance therefore provides additional trans- Jeremy Wright, Attorney General for England and Wales, has recently parency and clarity as to a corporate’s total potential liability when consid- indicated the government is considering extending the offence of failure to ering engaging in a DPA at an early stage. prevent bribery under section 7 of the Bribery Act 2010 into a general cor- The Fraud, Bribery and Money Laundering: Corporate Offender porate offence of failing to prevent economic crime, including fraud. The Definitive Guideline contains a 10-step process for the determining of fines: extended powers would make it easier for prosecutors to hold corporates • Compensation. to account for financial misconduct hence the long-term support of David • Confiscation. Green and the SFO. However, as section 7 of the Bribery Act 2010 remains • Determining the offence category with reference to culpability and untested itself, there has been subsequent condemnation of any moves to harm: culpability will be demonstrated by the offending corporation’s extend it. Ultimately, the issue is unlikely to be decided before the upcom- role and motivation for their conduct, with harm being represented by ing general election on 5 May 2015 given the major impact such an exten- a financial sum calculated as the amount obtained or intended to be sion would have on corporations. Indeed, the reasons given by the Law obtained, or loss avoided or intended to be avoided. There are three Commission why it is yet to consider reform of corporate criminal liability categories of culpability: high (A), medium (B) and lesser (C). are the, ‘underlying questions of public policy, which may have consider- • The amount that is determined as ‘harm’ is then multiplied by a per- able commercial and social impact’. centage dependent on the culpability level: high culpability has a mul- Regulators globally are now seeking out whistle-blowers more actively tiplier of 300 per cent, medium of 200 per cent, and lesser remains at than ever before, with the US offering significant financial rewards for 100 per cent. Each category (A, B and C) has a range, within which the cooperation under the Dodd-Frank Act. In previous years only 2 per cent of court can consider adjusting the fine, having considered factors that all enforcement actions had been a result of whistle-blower reports, how- increase or reduce the seriousness of the offence. ever the prospect of whistle-blowers in the US receiving up to 30 per cent of • Having arrived at a fine level, the court then has to ‘step back’ and con- the ultimate fine imposed on a corporation is likely to see further increases. sider the overall effect of all orders: compensation, confiscation and Given the recent $30 million payment, the largest ever, to a whistle-blower the fine. Cumulatively they should achieve the removal of all gain, by the Securities and Exchange Commission on 22 September 2014 it is appropriate additional punishment and deterrence. clear, three years in to the Dodd-Frank Act, that they are committed to • The court must then consider any factors which would indicate a this method of gaining information. Companies working in the US would reduction, such as any assistance provided to the prosecution. therefore do well to reassess their risk exposure given this increasing finan- • Potential reductions for guilty pleas in accordance with section 144 of cial motivation for third parties and employees to come forward against the Criminal Justice Act 2003 and the Guilty Plea guideline. company misconduct. • Ancillary orders are then considered by the court. • The court then looks at whether the sentence is just and proportionate 14 Prosecution of foreign companies to the offending behaviour under the totality principle. In what circumstances can foreign companies be prosecuted • Finally, the court must provide reasons for, and explain the effect of, for foreign bribery? the sentence as per section 174 of the Criminal Justice Act 2003. The Bribery Act 2010 may have significantly widened the jurisdictional The government says that each application for a DPA will be treated strictly reach of the UK in the prosecution of bribery offences. on its individual facts. There has as yet been no indication, however, as to Section 7 of the Bribery Act, the corporate offence of failing to prevent how this will be reflected in the fine. bribery, has a broad extraterritorial reach. The offence applies to a ‘rele- Entering into a DPA will not remove the protection of legal profes- vant commercial organisation’, defined to include entities formed or incor- sional privilege, and existing law and practice on this matter will continue porated outside the UK but that carry on a business, or part of a business, to apply. The government does not intend to make it a condition of the in any part of the UK. The act does not specify what ‘carrying on a business DPA that the commercial organisation should waive privilege though it has in the UK’ entails. As the Ministry of Justice guidance acknowledges, the made clear that any frivolous claims to invoke privilege or impede investi- courts will be the final arbiter as to whether an organisation carries on a gation into others will be taken as clear signs of non-cooperation putting business in the UK, taking into account the particular facts in each case. the success of a DPA in doubt in such circumstances. The principle that In the guidance, the government anticipates that the courts will adopt an accused’s right to refuse to disclose information subject to legal profes- ‘a common-sense approach’ meaning that organisations that do not have sional privilege will nonetheless continue to apply in its current form. ‘a demonstrable business presence’ in the UK would not be caught. In par- The Attorney General’s Office has issued guidelines to prosecutors ticular, the government does not expect companies solely admitted to the encouraging early discussions about guilty pleas in fraud trials, and intro- UK Listing Authority’s Official List, without more, to qualify as carrying ducing more transparency into the process. Practitioners interested in on a business or part of a business in the UK; nor does it expect parent charting the progress of the practice should consult the Attorney General’s companies that merely have a UK subsidiary, without significant business website, www.attorneygeneral.gov.uk. The three relevant guidelines are: activity, to fall within the definition.
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Caution should be exercised if relying on this part of the Ministry of Debarment Justice guidance. The prosecution guidance states clearly that prosecutors In different jurisdictions different offences attract different sanctions. must only take into account the ministry’s guidance when considering the Debarment is one of the more severe sanctions posing high risk of loss adequacy of procedures. The prosecution guidance states that where the of business. Needless to say, the possibility of debarment will feature government’s guidance provides explanations of the particular concepts prominently in considerations on how to structure a settlement in multi- relevant to the application of sections 1, 6 and 7 (ie, policy statements) jurisdictional investigations. Of particular concern is the Public prosecutors ‘may find this helpful’ when reviewing cases involving com- Procurement Directive (2004/18/EC) (the Directive). Article 45 of the mercial bribery. However, there is no obligation to take the policy explana- Directive provides: ‘Any candidate or tenderer who has been the subject of tions into account. a conviction by final judgment of which the contracting authority is aware In March 2011, the then-director of the SFO noted the ambiguity of the for one or more of the reasons listed below shall be excluded from partici- term ‘carries on business in the UK’ as follows: pation in a public contract.’ The following offences are on the list: The test is expressed in very simple terms. Are you carrying on your • participation in a criminal organisation, as defined in article 2(1) of business or part of your business in the UK? What does that mean? Council Joint Action 98/733/JHA; What about subsidiaries? What about raising finance? What about • corruption, as defined in article 3 of the Council Act of 26 May 1997 providing services over the Internet, or indeed in other ways? We shall and article 3(1) of Council Joint Action 98/742/JHA respectively; have to see. Ultimately our courts will apply that test to particular • fraud within the meaning of article 1 of the Convention relating to the circumstances. Do not be surprised though, if the Serious Fraud Office Protection of the Financial Interests of the European Communities; takes a wide view of this phrase so that we can ensure that the policy and objective of ensuring competitiveness is complied with. • money-laundering, as defined in article 1 of Council Directive 91/308/ EEC of 10 June 1991 on prevention of the use of the financial system Therefore, hypothetically, if the UK subsidiary of a foreign company was for the purpose of money-laundering. engaged in business relationships outside the UK where there was evi- dence of bribery, the UK subsidiary could be prosecuted and the parent Owing to the concern raised about the possibility of a conviction under sec- company might also find itself subject to investigation and proceedings. tion 7 of the Bribery Act permanently debarring companies from all totally EU and partially EU-funded projects, in March 2011 the Secretary of State 15 Sanctions for Justice announced that the corporate offence would only be a ground What are the sanctions for individuals and companies violating for discretionary, not mandatory, debarment. the foreign bribery rules? 16 Recent decisions and investigations The penalties of the Bribery Act are found in section 11: Identify and summarise recent landmark decisions or investigations involving foreign bribery. (1) An individual [natural person] guilty of an offence under section 1, 2 or 6 is liable – Investigations (a) on summary conviction, to imprisonment for a term not exceeding On 19 September 2014 the Chinese subsidiary of GlaxoSmithKline plc 12 months, or to a fine not exceeding the statutory maximum, or to both, (GSK) was found guilty by a Chinese court of allegations of corruption and (b) on conviction on indictment, to imprisonment for a term not received a record fine of £297 million with five of the company’s manag- exceeding 10 years, or to a fine, or to both. ers also receiving suspended prison sentences. The corruption concerned (2) Any other person guilty of an offence under section 1, 2 or 6 is the funnelling of up to 3 billion yuan in bribes to encourage doctors to use liable – its medicines, as revealed by anonymous e-mails from a whistle-blower in (a) on summary conviction, to a fine not exceeding the statutory May 2013. maximum, On 27 May 2014, the SFO announced the launch of a formal crimi- (b) on conviction on indictment, to a fine. nal investigation into the commercial practices of GSK, Britain’s biggest (3) A person guilty of an offence under section 7 is liable on conviction pharmaceuticals group, and its subsidiaries. The SFO is working with on indictment to a fine. authorities in China on the investigation marking a first in Anglo-Chinese relations for the SFO. The US Department of Justice (DoJ) is also inves- For convictions under the previous regime the penalties for foreign and tigating GSK for potential breaches of the Foreign Corrupt Practices Act domestic bribery are the same. Under the 1889 Act and the 1906 Act they and GSK themselves have stated they are actively investigating claims of are as follows: on summary conviction, a maximum of six months’ impris- bribery in Poland, Iraq, Syria, Jordan and Lebanon. onment or a fine to the statutory maximum, currently £5,000; on indict- The investigation coincides with whistle blower reports from French ment, seven years’ imprisonment, an unlimited fine or both. The common drug manufacturer Sanofi alleging improper payments to healthcare pro- law bribery offences have no prescribed or maximum penalties, although fessionals in East Africa and the Middle East. Additionally, two employ- generally sanctions for comparable statutory offences can guide the ees of Swiss drug maker Novartis pleaded guilty to allegations of bribery courts. Penalties for attempt and conspiracy are the same as for the related involving improper payments in October 2014, marking an uncomfortable offence. There is no mandatory minimum sentence for any bribery offence. period for the pharmaceutical industry. The SFO publishes a list of its current investigations which can be Other sanctions found on its website. Those specifically concerned with allegations of Generally, the UK courts may not impose any administrative or civil sanc- bribery and corruption include ENRC Plc, the circumstances surrounding tions on persons convicted of bribery; however, the Company Directors the Qatar Sovereign Wealth Fund’s investment in Barclays Bank, and GPT Disqualification Act 1986 allows the application of a civil or administrative Special Project Management Ltd (EADS). sanction in the form of disqualification of directors for general misconduct in connection with companies. Civil actions The POCA entered into force on 24 March 2003. It punishes money- As global enforcement of bribery and anti-corruption laws becomes more laundering, including the proceeds of corruption, and established a hierar- prevalent, competitors in markets where there have been high profile chical regime of ‘asset recovery’ (extending through criminal confiscation, investigations are increasingly finding the opportunity to claim they have civil forfeiture and taxation). Furthermore, an ‘enforcement authority’ been denied business and/or suffered significant losses as a result of their may apply to the High Court for a civil recovery order under Part 5 of the competitor’s malfeasance. This ‘piggy-backing’ onto prosecutions for cor- POCA 2002. An enforcement authority may be the director of the National ruption is likely to become an increasingly common theme given the recent Crime Agency, the DPP or the director of the SFO. If the enforcement relaxation of the rules on bringing an unlawful means conspiracy claim. authority proves to the civil standard the existence of ‘property obtained On 8 August 2014 Mr Justice Flaux rejected Jalal Bezee Mejel Algaood through unlawful conduct’ (recoverable property) or property that repre- & Partners’ (JBMA) US$42m claim for ‘follow on’ damages, alleging that sents it, the court may make an order vesting the property in a trustee for but for the bribery activities of Innospec Ltd in Iraq (see question 31 for civil recovery. further details) they would have secured the lucrative contract to supply
232 Getting the Deal Through – Anti-Corruption Regulation 2015 Peters & Peters UNITED KINGDOM fuel additives to Iraqi authorities. While the court found, ‘there was clearly These are the first convictions achieved by the SFO of individuals criminal wrongdoing’, causation was not sufficiently proven, illustrating under the Bribery Act 2010 with previous prosecutions having thus far the key difficulty in such claims; the court must be persuaded as to what been brought by the Director of Public Prosecutions for offences such as would have occurred but for the alleged, or proven, corruption. In the con- the attempted bribery of a university tutor. David Green QC, Director of text of competitive commercial markets to cross this threshold will require the SFO, commented that such convictions illustrated, ‘the SFO’s ability detailed analysis and strong supporting factual evidence. and determination to bring criminals to justice’. While it has been made On 5 November 2014 the much-reported Bernie Ecclestone litigation clear that the SFO will target directors of private UK businesses, the convic- involving German media group Constantin Medien AG concluded when tions still do not provide further guidance on how corporates will come to the Court of Appeal upheld the High Court’s decision to dismiss their claim interact with the Bribery Act as we continue to await the first prosecution for damages under the tort of unlawful means conspiracy. Constantin involving a company. alleged that Ecclestone and his family trust made corrupt payments to Dr On 22 December 2014 the SFO secured convictions against Smith & Gerhard Gribkowsky, a member of the management board of Bayerische Ouzman Ltd, its former chairman and sales and marketing director fol- Landesbank, in order to facilitate the sale of Formula One shares to his lowing a four-year investigation into corrupt payments totalling £395,074 preferred buyer in 2006. Notwithstanding the judge’s clear findings that to public officials in Kenya and Mauritania for the award of business con- the payments amounted to a bribe, the causation hurdle again proved the tracts. Smith & Ouzman is a UK printing company specialising in security downfall in that Constantin could not surpass the evidential burden of documents such as ballot papers and event ticketing. The company was establishing that the bribes caused its loss. convicted of three counts of corruptly agreeing to make payments, con- Though both claims were unsuccessful the courts have made clear trary to section 1 (1) of the Prevention of Corruption Act 1906. Christopher such claims are viable, the major obstacle being proof of causation. While it Smith, former chairman, was convicted of two counts of corruptly agreeing may seem sufficient to prove substantial corrupt payments had an impact, to make payments and Nicholas Smith, former sales and marketing direc- the cases highlight the importance of claimants ensuring every link of the tor, convicted of three counts of corruptly agreeing to make payments. chain of causation is proven (ie, a clear demonstration that in the absence Sentencing is due to take place on 12 February 2015. of the bribe the claimants would not have suffered loss). Financial record keeping Criminal proceedings 17 Laws and regulations On 22 July 2014 Bruce Hall was sentenced to 16 months in prison and made subject to a confiscation order of over £3 million, facing a further 10 years’ What legal rules require accurate corporate books and records, imprisonment were he to default. Hall had previously entered a guilty plea effective internal company controls, periodic financial to a charge of conspiracy to corrupt relating to bribes totalling £2.9 mil- statements or external auditing? lion while an employee of Aluminium Bahrain BSC (Alba). The corrupt payments related to contracts for the supply of goods and services to Alba In the UK, companies are not required to monitor and report on the effec- between 2002 and 2005. Hall was further ordered to compensate Alba in tiveness of their internal control mechanisms, although in the financial the amount of £500,010 and pay £100,000 towards prosecution costs. services sector there are statutory requirements as to compliance mech- As of 31 July 2014 all such payments have been paid in full. In addition, as anisms and internal controls. Specifically, financial service providers part of Hall’s mitigation he voluntarily agreed to disgorge all other corrupt must comply with statutory requirements for internal controls and listed payments received during his tenure at Alba, those payments being out- companies have a ‘comply or explain’ duty in respect of the effective- side the SFO’s jurisdiction to prosecute. Accordingly proceedings under ness of internal mechanisms under the UK Corporate Governance Code Part 5 of the Proceeds of Crime Act 2002 were initiated in the High Court (https://frc.org.uk/Our-Work/Publications/Corporate-Governance/ to recover the additional sum and the repayment of US$900,000 was UK-Corporate-Governance-Code-September-2012.pdf). finalised as of 17 July 2014. The 2007 Money Laundering Regulations require each regulated busi- The first trial involving charges brought by the SFO under the Bribery ness or profession to maintain, inter alia: identification procedures; record Act 2010 commenced on 8 October 2014 at Southwark Crown Court aris- keeping procedures; and internal reporting procedures. ing from the SFO’s investigation into four employees of biofuel invest- The Companies Act 2006 was a major overhaul of company law. Some ment company Sustainable Growth Group (SGG) and its subsidiary provisions came into force on 1 October 2007, and others on 6 April 2008; companies Sustainable AgroEnergy plc (SAE) and Sustainable Wealth however, these are too numerous to quote here. The company law provi- (UK) Investments LTD (SWI). The investigation concerned the mis-selling sions of the 2006 act restate almost all of the provisions of the Companies of investment products connected with self-invested pension plans to UK Act 1985, together with the company law provisions of the Companies investors between April 2011 and February 2012. The investments were Act 1989 and the Companies (Audit, Investigations and Community sold by deliberately misleading customers about SAE’s interests in ‘green Enterprise) Act 2004. Of particular interest to practitioners will be Part 15, biofuel’ Jatropha tree plantations in Cambodia, resulting in approximately relating to accounts and records, and the offences contained therein for £23 million in illegal gains being obtained from over 250 victims. By pro- those who fail to comply with the duty to keep accounting records. Annex A ducing false sales invoices the sales agents were also found to be obtaining to the SFO’s Guidance on Corporate Prosecutions contains a list of possible commission rates of 65 per cent on investor’s funds. offences under the Companies Act 2006 for the prosecutors’ consideration On Friday 5 December three of the defendants were convicted while when reviewing a case against a company. the fourth defendant, SAE financial controller Fung Fong Wong, was Businesses regulated by the FCA are subject to disciplinary proce- acquitted of one count of conspiracy to furnish false information and two dures where they have failed to meet the FCA’s regulatory requirements, counts of bribery. On Monday 8 December 2014 those convicted received which could include a failure to have effective anti-corruption procedures the following sentences; Gary West, former director and chief commercial in place. officer of SAE received 13 years’ imprisonment in total for conspiracy to The UK is also the first member state to adopt the EU Directive on commit fraud by false representation, fraudulent trading, conspiracy to Extractive Industries through The Reports on Payments to Governments furnish false information and two counts of bribery contrary to section 2 Regulations 2014. The regulations require detailed disclosure of a range of (1) and (2) of the Bribery Act 2010. In relation to the Bribery Act offences he payments, including fees, taxes, royalties and dividends made to govern- received two concurrent four-year prison sentences. ments on a country and project basis, as of 1 January 2015. James Whale, former director, chief executive officer and chairman of SGG received nine years’ imprisonment in total on conviction for conspir- 18 Disclosure of violations or irregularities acy to commit fraud by false representation and fraudulent trading. Stuart To what extent must companies disclose violations of anti- Stone, director of SJ Stone Ltd, a sales agent of unregulated investment and bribery laws or associated accounting irregularities? pension products, received six years imprisonment in total for conspiracy to furnish false information and two counts of bribery contrary to section 1 The Bribery Act contains no obligation for reporting any instances of (1) and (2) of the Bribery Act 2010. In relation to the Bribery Act offences he bribery and corruption. This is consistent with existing company law and received two concurrent six-year prison sentences. Confiscation orders are accounting standards, neither of which set out specific requirements in expected to be pursued against all parties. respect of the recognition, measurement, presentation or disclosure of matters relating to bribery offences. If a transaction involving a bribery offence were material to the reporting entity, it would probably fall within www.gettingthedealthrough.com 233 UNITED KINGDOM Peters & Peters the definition of an ‘exceptional item’ as defined in the Financial Reporting Practitioners should refer to the various sections of the Companies Act Standards on Reporting Financial Performance, which is required to be 2006 for penalties applicable under that legislation. disclosed separately, along with an adequate description to enable its In the BAE criminal proceedings Mr Justice Bean, having observed nature to be understood. that under section 221 of the Companies Act 1985 he normally would have As regards internal company controls and the role of company direc- imposed a fine of £5,000, sentenced the company to £500,000 fine on the tors, companies are not obliged to maintain or report on the effectiveness basis that: of internal controls. Directors are under no obligation to declare that the company complies with UK legal and regulatory requirements or that … by describing the payments in their accounting records as being for there are no errors or irregularities contained in the financial information. the provision of ‘technical services’ the Defendants were concealing However, the broad spread of liability in the section 7 corporate offence from the auditors and ultimately the public the fact that they were may result in greater self-reporting of irregularities. making payments to Mr Vithlani, 97 per cent of them via two offshore The anti-money-laundering provisions contained within sections 327 companies, with the intention that he should have free rein to make to 329 and sections 330 to 332 of POCA provide for possible disclosure of such payments to such people as he thought fit in order to secure the such violations. Radar Contract for the defendants, but that the defendants did not want to know the details. 19 Prosecution under financial record keeping legislation Are such laws used to prosecute domestic or foreign bribery? 21 Tax-deductibility of domestic or foreign bribes Do your country’s tax laws prohibit the deductibility of Yes, they have been. The controversial settlement with BAE Systems domestic or foreign bribes? announced by the SFO and the US DoJ incorporated an agreement between the SFO and BAE that the company would plead guilty to an offence under Although no specific provision exists prohibiting the deductibility of section 221 of the Companies Act 1985 of failing to keep accurate account- bribe payments to foreign public officials, section 1304 of the Corporation ing records in relation to its activities in Tanzania. The company agreed Taxes Act 2009 and section 55 of the Income (Trading and Other) Act of to make a £30 million ex gratia payment for the benefit of the people of 2005 provides that tax deductibility is denied for any payment the mak- Tanzania, less any financial orders imposed by the court. In the US, how- ing of which constitutes the commission of a criminal offence in the UK. ever, BAE pleaded guilty to a criminal charge of misleading the US govern- Additionally, the Finance Act 2002 has ensured that the prohibition also ment and was fined US$400 million. applies to payments that take place wholly outside the jurisdiction of the On 21 December 2010, Mr Justice Bean sentenced BAE to a £500,000 UK. Although deductibility of bribe payments is clearly prohibited within fine and ordered it to pay £225,000 towards the prosecution’s costs. the UK, some of the Crown dependencies and overseas territories are not However, the judge came close to halting the process for lack of evidence in compliance with provisions of the OECD Council Recommendation on before him: the Tax Deductibility of Bribes to Foreign Public Officials.
I could not, without hearing evidence, accept any interpretation of Domestic bribery the basis of plea which suggested that what BAE were concealing by the section 221 offence was merely a series of payments to an expen- 22 Legal framework sive lobbyist. Such evidence might, for example, have involved wit- Describe the individual elements of the law prohibiting bribery nesses who could testify, if it really is the case, that legitimate lobbyists of a domestic public official. could be paid 30 per cent of the value of a $40 million contract simply as recompense for their time and trouble. Neither side sought to call Current position evidence, although I indicated that I was prepared to grant an Sections 1 and 2 of the Bribery Act set out two active and four passive brib- adjournment for them to do so. ery scenarios (cases) that describe conduct of the payer or the recipient I asked Mr Temple what should have been in the accounting that will constitute a bribery offence. records instead of the phrase ‘provision of technical services’. He replied that something along the lines of ‘public relations and marketing ser- Section 1 vices’ would have been a more accurate description. If that had been Section 1 defines the offence of bribery as it applies to the person who a true and accurate description of the services which Mr Vithlani was offers, promises or gives a financial or other advantage to another. That going to provide then I question whether it would have been appropri- person is referred to in the section as P – he or she is the payer. Section 1 ate to prosecute at all. Certainly the section 221 offence would have provides that P is guilty of an offence if one of two scenarios applies to him been suitable for being sentenced in the magistrates court. I would or her: myself have imposed a fine of at most £5,000. Case 1 His lordship also expressed surprise to find the prosecution granting blan- Case 1 is where – ket immunity for all offences committed prior to February 2010 whether (a) P offers, promises or gives a financial or other advantage [‘Financial disclosed or otherwise; and that no individuals were being charged despite or other advantage’ is left to be determined as a matter of common the opening of the case by the SFO submitted that the BAE offence ‘was sense by the tribunal of fact] to another person, and the result of a deliberate decision by one or more officers’. The judge con- (b) P intends the advantage – ceded, however, that he had no power to vary or set aside the settlement (i) to induce a person to perform improperly a relevant function or activ- agreement. ity, or Section 221 has been replaced by an identical section – section 386 – in (ii) to reward a person for the improper performance of such a function or the Companies Act 2006. activity.
20 Sanctions for accounting violations It does not matter whether the person to whom the advantage is offered, What are the sanctions for violations of the accounting rules promised or given is the same person as the person who is to perform, or has performed, the function or activity concerned. associated with the payment of bribes?
The offence of fraudulent accounting under section 993 of the Companies Case 2 Act 2006 applies to all those who are knowingly a party to the carrying on Case 2 is where – of the business with the intent to defraud creditors, regardless of whether (a) P offers, promises or gives a financial or other advantage to another the company is, or has been, wound up. Penalties for this offence on sum- person, and mary conviction carry a maximum term of 12 months’ imprisonment or a (b) P knows or believes that the acceptance of the advantage would itself £5,000 fine or both, and on conviction on indictment, a maximum term constitute the improper performance of a relevant function or activity. of 10 years’ imprisonment or a fine not exceeding the statutory maximum or both.
234 Getting the Deal Through – Anti-Corruption Regulation 2015 Peters & Peters UNITED KINGDOM
In neither case does it matter whether the advantage is offered, promised The giving, promising or offering of a financial or other advantage or given by P directly or through a third party. whatsoever to any person, whether for the benefit of that person, or of another person, as an inducement to or reward for doing or forbearing Section 2 to do anything in respect of any matter or transaction whatsoever, actual Section 2 defines the offence of bribery as it applies to the recipient or or proposed in which the public body is concerned are offences under the potential recipient of the bribe, who is called R. It distinguishes four cases, Bribery Act, punishable with a maximum of 10 years’ imprisonment. for which it does not matter whether R does or will request, agree to receive or accept the advantage directly or through a third party or whether the 24 Public officials advantage is (or is to be) for the benefit of R or another person. How does your law define a public official and does that definition include employees of state-owned or state- Case 3 controlled companies? Case 3 is where R requests, agrees to receive or accepts a financial or other advantage intending that, in consequence, a relevant function The Bribery Act makes no distinction in domestic law between the bribery or activity should be performed improperly (whether by R or another of public officials and private individuals. Under sections 1 and 2 the bribe person). must be connected to an improper performance (or non-performance) of a ‘relevant function or activity’. Thus, ‘relevant function or activity’ is Case 4 defined in section 3 as being: Case 4 is where – • any function of a public nature; (a) R requests, agrees to receive or accepts a financial or other advan- • any activity connected with a business; tage, and • any activity performed in the course of a person’s employment; and (b) the request, agreement or acceptance itself constitutes the • any activity performed by or on behalf of a body of persons, whether improper performance by R of a relevant function or activity. corporate or not. In this scenario, it does not matter whether R knows or believes that the performance of the function or activity is improper. These functions or activities must meet one of the following three condi- tions in order to qualify as ‘relevant’ function or activity: Case 5 • a person performing the function or activity is expected to perform it Case 5 is where R requests, agrees to receive or accepts a financial or in good faith; other advantage as a reward for the improper performance (whether • a person performing the function or activity is expected to perform it by R or another person) of a relevant function or activity. impartially; and Again, in this scenario as with case 4 above, it does not matter whether • a person performing the function or activity is in a position of trust by R knows or believes that the performance of the function or activity is virtue of performing it. improper. Previous regime Case 6 The Court of Appeal decision in Whitaker [1914] 3 KB 1283 provides the Case 6 is where, in anticipation of or in consequence of R request- most widely cited definition concerning who is to be regarded as a public ing, agreeing to receive or accepting a financial or other advantage, a officer for the purposes of common law bribery. Under the definition a pub- relevant function or activity is performed improperly either by R, or by lic officer is ‘an officer who discharges any duty in the discharge of which another person at R’s request or with R’s assent or acquiescence. the public are interested, more clearly so if he is paid out of a fund provided Not only does it not matter whether R knows or believes that the per- by the public’. formance of the function or activity is improper, but in this scenario, As originally enacted, the 1889 Act was concerned only with local pub- where a person other than R is performing the function or activity, it lic bodies (such as bodies that have power to act under and for the purposes also does not matter whether that person knows or believes that the of any act relating to local government, or the public health, or otherwise to performance of the function or activity is improper. administer money raised by rates in pursuance of any public general act). Section 4(2) of the 1916 Act extended this definition to encompass ‘local Previous regime and public authorities of all descriptions’. This, however, does not include Conduct occurring prior to 1 July 2011 falls under the previous regime with the Crown or a government department. Schedule 11, paragraph 3 of the the possible offences being: Local Government and Housing Act 1989 makes provision for including • the common law offence of bribery; companies ‘under the control of one or more local authorities’, but this • the two offences in section 1 of the Public Bodies Corrupt Practices Act provision is not in force. 1889; and The 1906 Act, in extending the law of corruption into the private • the first two offences in section 1(1) of the Prevention of Corruption sector, defined ‘agent’ as meaning ‘any person employed by or acting for Act 1906. another’. Section 1(3) of the act further clarified that ‘a person serving under the Crown or under any corporation or any […], borough, county, or All these offences address the gift or receipt of bribes (or corrupt advan- district council, or any board of guardians, is an agent within the meaning tages), but they differ in their application depending upon who is the recipi- of this Act.’ ent. The common law applies where the person who receives the bribe holds any public office; the 1889 Act applies where he or she is a ‘member, 25 Public official participation in commercial activities officer or servant’ of any local or public authority and the 1906 Act applies Can a public official participate in commercial activities while where he or she is an ‘agent’ – which includes persons working in the serving as a public official? private sector as well as persons serving under the Crown and other public authorities. The development of effective codes of conduct regulating those who are These offences were amended by the Prevention of Corruption Act involved in public life has been accepted as being essential in reducing 1916, which introduced the presumption of corruption. Section 2 of the the prevalence of corruption in society. The codes that have been devel- 1916 Act provides that where money or any ‘consideration’ is received by oped contain detailed rules of conduct tailored to the requirements of the a public official from a person seeking to obtain a public contract, it shall office-holders concerned and the risks they are likely to encounter. The be presumed to have been corruptly received unless the contrary can be rules include requirements to declare and register interests and to avoid proved. conflicts of interest and situations that may create a perception of conflict of interest. 23 Prohibitions The Committee on Standards in Public Life is an advisory non- departmental public body of the UK government. Its first general recom- Does the law prohibit both the paying and receiving of a bribe? mendation, in May 1995, was that the principles underpinning standards The Bribery Act, in sections 1 and 2, very clearly prohibits the paying and in public life should be restated. These principles as formulated by the com- the receiving of a bribe respectively. mittee have come to be known as the Seven Principles of Public Life and www.gettingthedealthrough.com 235 UNITED KINGDOM Peters & Peters have come to be regarded as the ‘touchstone for ethical standards across 28 Private commercial bribery the public sector generally’ (Sixth Report). Their second recommendation Does your country also prohibit private commercial bribery? was that all public bodies should draw up codes of conduct incorporating these seven principles. The Bribery Act makes no distinction between public official and private The Principle of Selflessness states that: ‘Holders of public office commercial bribery. It is therefore prohibited under sections 1 and 2 of should take decisions solely in terms of the public interest. They should not the Bribery Act (see question 22). Under sections 1 and 2 the bribe must do so in order to gain financial or other material benefits for themselves, be connected to the improper performance of a ‘relevant function or their family, or their friends.’ activity’. This has been defined very widely (see question 24) and can be The Principle of Integrity states that: ‘Holders of public office should (among others) an activity connected with a business, in the course of not place themselves under any financial or other obligation to outside employment or performed by or on behalf of a group of persons. This eas- individuals or organisations that might influence them in the performance ily encompasses private commercial relationships and thus prohibits pri- of their official duties.’ vate commercial bribery. By way of example, the Ministerial Code states that ministers must International law on bribery within the private sector is somewhat ensure that no conflict arises, or appears to arise, between their public undeveloped. In essence, two conventions (Council of Europe and UN) duties and their private interests, financial or otherwise. and a Framework Decision of the EU contain requirements for the crimi- Ministers customarily place their family assets in blind trusts during nalisation of the giving or receiving of undue advantages in the course of the currency of their ministry. business activities for actions which represent a breach of duty. The provi- sions in the conventions are in effect optional: reservations may be made 26 Travel and entertainment on articles 7 and 8 in the Council of Europe convention, and article 21 of the UN convention only requires parties to ‘consider’ such an offence. Describe any restrictions on providing domestic officials with gifts, travel expenses, meals or entertainment. Do the Previous regime restrictions apply to both the providing and receiving of such The UK, in 1906, was the first country to legislate on private-to-private benefits? bribery. UK courts will also hear cases in which elements of the offence The new offence of corporate bribery in section 7 of the Bribery Act applies of private-to-private bribery involving UK nationals or companies have to both domestic and foreign officials: the offence is the failure to prevent occurred abroad. This applies both to the public and private sectors. See bribery. Therefore, besides the codes of conduct that public officials and question 2. many private employees are subject to, in response to the section 7 offence The common law offence of bribery is limited to public sector many companies have re-evaluated their guidelines and restrictions for corruption. corporate hospitality and business expenditure, which would encompass business relations with domestic officials. The principles upon which the 29 Penalties and enforcement section 7 guidance is based highlight the importance of ongoing training What are the sanctions for individuals and companies violating and monitoring that it must be assumed will encompass this area. the domestic bribery rules? The new guidance, as mentioned in question 5, also applies to domes- tic business expenditure. The penalties for foreign and domestic bribery are the same. It is a well-established and recognised rule that no minister or public servant should accept gifts, hospitality or services from anyone who would, 30 Facilitating payments or might appear to, place him or her under an obligation. The same princi- Have the domestic bribery laws been enforced with respect to ple applies if gifts, etc, are offered to a member of their family. See clauses facilitating or ‘grease’ payments? 7.20 to 7.24 of the Ministerial Code. In February 1997 Michael Allcock, a senior tax inspector in the Special A facilitation payment is given to an official as encouragement to do some- Compliance Office, was convicted on six counts of corruptly accepting thing that in any case would fall within the official’s functions. Facilitation money and other benefits from taxpayers, between 1987 and 1992, in payments are not exempt under UK law: common law and UK legislation return for favourable treatment of their tax affairs. He was sentenced to have never distinguished ‘facilitation payments’ from other bribes. The five years’ imprisonment. Bribery Act has made no change to the law and there have been no reported cases. 27 Gifts and gratuities See also question 6. Are certain types of gifts and gratuities permissible under your 31 Recent decisions and investigations domestic bribery laws and, if so, what types? Identify and summarise recent landmark decisions and There are no specific guidelines or permitted items contained in legisla- investigations involving domestic bribery laws, including any tion; however, there has been a large amount of guidance. Cases of this investigations or decisions involving foreign companies. nature will turn on their facts in the context of all the guidance that exists. Basically businesses should wherever possible avoid gifts and gratuities to Alstom anyone who can influence the obtaining/sustaining of business advantage, Alstom is a manufacturer in the rail, power and electricity transmission or that would induce improper performance. sectors who has been subject to criminal inquiries into alleged corruption The convictions in the Sainsbury’s potato-buyer corruption case, by authorities in UK, France, Switzerland, Brazil and the US since 2009. which concluded in May 2012, provide assistance in judging the line The final resolution of the allegations against each of Alstom’s UK subsidi- between acceptable corporate hospitality and outright bribery, as well as aries will provide significant insight into the use of the recently published the concept of inducement and improper conduct or performance. The UK sentencing guidelines on fraud, bribery and money laundering. While buyer received hospitality and gifts from Greenvale, which supplies pota- Alstom already faces potential debarment from competing within the toes to the supermarket, including: European Union for public contracts (as per the Public Sector Procurement • a stay at Claridge’s costing a total of £200,000; Directive), the new guidelines encourage a hard-line approach to corporate • a luxury 12-day excursion to the Monaco Grand Prix in 2007, at a cost offenders, with fines of up to four times the gross profit earned on tainted to Greenvale of around £350,000; and contracts. • lump-sum payments, via an account in Luxembourg, in the amount of On 24 July 2014 the SFO announced it would be initiating proceed- £1.5 million (supposedly for the storage of potatoes in Spain and other ings against Alstom Network UK Ltd (Alstom Network), a UK subsidiary bogus activities). of Alstom. Alstom Network has been charged with three offences of cor- ruption contrary to section 1 of the Prevention of Corruption Act 1906 and three offences of conspiracy to corrupt contrary to section 1 of the Criminal Law Act 1977. The alleged offences are said to have taken place between 1 June 2000 and 30 November 2006 and concern large transport projects in India, Poland and Tunisia. The company is alleged to have paid
236 Getting the Deal Through – Anti-Corruption Regulation 2015 Peters & Peters UNITED KINGDOM
Update and trends The targeting of individuals, in particular senior managers, continues potentially manipulative behaviour, control conflicts of interest and to be popular with further legislative support (yet to be enacted) in implement robust governance and oversight arrangements. The the form of section 36 of the Financial Services (Banking Reform) Act consultation period ended 30 January 2015 with the FCA expected to 2013. The section creates an offence for senior managers in a financial publish final rules during the first quarter of 2015 implementing the institution who are either, involved in a decision, or failed to be involved additional regulation as of 1 April 2015. in a decision, that causes a financial institution to fail. Whilst not yet The UK also leads the way on implementing a publicly accessible enacted, the appetite to attach liability to those heading companies register of beneficial ownership, with the government committing to is likely to continue given the findings of the OECD Foreign Bribery implementation of a central registry at the Lough Erne G8 Conference Report, published 2 December 2014, that senior management and in June 2014. The registry would contain information on individuals CEOs were aware of and endorsed corrupt activity in 12 per cent of with an interest in more than 25 per cent of a company’s shares or voting all enforcement actions and a further 41 per cent of all cases involved rights, or who otherwise controls the way it is run. Uncovering the true corporate managers. owners of UK companies would provide the transparency and openness On 22 December 2014, in the wake of the LIBOR scandal, the required to help tackle tax evasion, money laundering and other financial FCA published a consultation paper on the extension of its regulation crimes. However, the business community, particularly in Overseas of LIBOR to seven additional benchmarks thereby implementing the Territories, has criticised the proposals as unnecessary, countering that recommendations of the Fair and Effective Markets Review undertaken current procedures remain robust. It remains to be seen what comes of in June 2014. The FCA have proposed a senior individual within each the proposals, although with a general election approaching in May 2015 firm should oversee compliance with the key requirements to identify there is unlikely to be rapid progress on the matter.
approximately £5.27 million in bribes over the six-year period to win train being prosecuted falls to be considered under the old law, the SFO will need and tram infrastructure deals, disguising the corrupt payments as consul- to satisfy the ‘directing mind’ principle whereby it must be established tancy agreements. The proceedings against Alstom Network commenced employees of sufficient seniority engaged in the behaviour alleged in order as a result of information provided to the SFO by the Office of the Attorney for the company to attract liability. This in of itself suggests that other indi- General in Switzerland, who in 2011 ordered Alstom to pay 38.5 million viduals will also be prosecuted. Swiss francs for corporate negligence due to its failure to prevent bribery. To finish an uncomfortable year for the conglomerate, on 22 December The first hearing in the Alstom Network matter took place at Westminster 2014 Alstom SA pleaded guilty, as part of a settlement with the DoJ, to having Magistrates’ Court on 9 September 2014 and proceedings remain ongoing. paid US$75 million in bribes to government officials around the world that Robert Hallett, former managing director of Alstom Transport India, resulted in US$4 billion worth of power projects across the globe, rendering is accused of paying agents of Delhi Metro Rail Corporation €3.1 million US$300 million in profits. Deputy Attorney-General James Cole described and 19.9 million rupees, ‘as inducements or rewards for showing favour to the corruption as, ‘astounding in its breadth, its brazenness and its world- the Alstom Group in relation to the award or performance of a contract’, wide consequences’. Alstom agreed to pay a fine of US$772.3 million as a making him the first individual to face charges in relation to the matter. result, the largest ever fine for breaches of the Foreign Corrupt Practices Act UK press reports have suggested his trial may be heard alongside that of (FCPA) issued by the DoJ. Alstom also pleaded guilty to offences of falsify- Alstom Network, although Mr Hallett’s matter is currently set for a plea ing records and failing to implement adequate controls over bribes paid to and case management hearing on 28 January 2015 at Southwark Crown officials in Indonesia, Saudi Arabia, Egypt, Taiwan and the Bahamas. The Court with no firm indication of joinder. ultimate fine levied reached such heights due to Alstom’s continued refusal On 22 December 2014 the SFO brought further charges against a sec- to cooperate with the investigation for several years and their failure to vol- ond UK unit of Alstom, Alstom Power Ltd, along with employees Nicholas untarily disclose any of the relevant misconduct and similar misconduct Reynolds and Johanes Villi Venskus. All parties face two counts of conspir- known to them to be present in other subsidiaries. In addition, as part of ing to bribe an agent and offering a bribe to an agent between 14 February the overall settlement Alstom Network Schweiz AG, a Swiss subsidiary, 2002 and 31 March 2010. The charges relate to contracts with Lithuanian pleaded guilty to conspiracy to violate the anti-bribery provisions of the companies Vilmetrona UAB and Lietuvos Elektrine and a project Alstom Foreign Corrupt Practices Act, and two US subsidiaries, Alstom Power and was involved in at the Elektrenai Power Plant in Lithuania. The matter was Alstom Grid, entered into deferred prosecution agreements relating to the listed for preliminary hearing at Southwark Crown Court on 5 January 2015. bribery charges. Press reports in the UK have suggested more individuals are expected Alstom is also currently in the process of selling most of its energy divi- to face prosecution in 2015 relating to both the Alstom Network and Alstom sion, including Alstom Power, to General Electric Co who had previously Power matters. The current charges against Alstom’s UK subsidiaries agreed to take on any subsequent liabilities relating to the bribery and cor- involve conspiring with directors and other employees. As the conduct ruption charges. However, the DoJ has now insisted that the French group
Monty Raphael QC [email protected] Neil Swift [email protected]
15 Fetter Lane Tel: +44 20 7822 7777 London EC4A 1BW Fax: +44 20 7822 7788 United Kingdom www.petersandpeters.com
www.gettingthedealthrough.com 237 UNITED KINGDOM Peters & Peters pay the entire US$772.3 million fine with no part eligible for transfer to Kerrison were both upheld by the Court of Appeal, though Kerrison’s initial General Electric. Considering the SFO does not offer any guidance on suc- four-year sentence was reduced to three years. cessor liability akin to that found in the DoJ’s Resource Guide to the FCPA, Paul Jennings, another former chief executive, pleaded guilty at it remains to be seen how UK authorities will apportion any fines ultimately Southwark Crown Court on 9 June 2012 to two counts of conspiracy to cor- imposed in the event of a UK conviction. Notwithstanding that the new rupt and ultimately received a two-year prison sentence. David Turner, directors will not be liable for the company’s historical actions, enforce- former senior executive, entered into an agreement with the SFO as a ment action undertaken against previous owners may cause severe reputa- cooperating defendant under section 73 of the Serious Organised Crime tional issues for the company. Moreover, the proceeds of historical bribery and Police Act 2005 in January 2010, pleaded guilty In January 2012 and and corruption subsumed within the current business – revenue, improperly subsequently provided six days’ worth of evidence in the trials of Kerrison obtained licences, etc – will nevertheless be targeted by regulators. and Papachristos. In light of this extensive cooperation and previous dis- gorgement to the US Securities and Exchange Commission the court wasp- Innospec ersuaded to impose a suspended sentence order with a requirement of 300 On 4 August 2014, four former executives of Innospec Ltd were sentenced hours’ unpaid work to be completed within 12 months. No confiscation some six years after the SFO commenced its enquiries into the affairs of the order was sought. company, and some nine years after the US DoJ did the same for the US The judge sent out a clear message in suspending Turner’s sentence – parent company Innospec Inc. During sentencing the judge noted the, ‘cor- there are significant benefits for individuals who cooperate fully and enter ruption in this company was endemic, institutionalised and ingrained’. The guilty pleas. While cooperation may prove unattractive at the outset of such investigations uncovered the payment of millions of dollars to Innospec’s investigations given the defendant often lacks knowledge of the strength of local agents in Indonesia and Iraq in order to secure supply contracts and the case against them, Turner’s suspended sentence makes clear that upon rig governmental product test results. conclusion, years or months down the line, significant benefits in outcome On 18 June 2014 at Southwark Crown Court former chief executive, will result. Dennis Kerrison, and regional sales director, Miltos Papachristos, were both convicted of conspiracy to commit corruption following trial. Kerrison * The authors thank William Cholerton, of Peters & Peters Solicitors LLP, received a sentence of four years in prison and Papachristos was sentenced for his assistance. to 18 months. On 19 September 2014 the convictions of Papachristos and
238 Getting the Deal Through – Anti-Corruption Regulation 2015 Miller & Chevalier Chartered UNITED STATES
United States
Homer E Moyer Jr, James G Tillen, Marc Alain Bohn and Amelia Hairston-Porter Miller & Chevalier Chartered
1 International anti-corruption conventions Jurisdiction To which international anti-corruption conventions is your Jurisdiction exists over US persons and companies acting anywhere in the world, companies listed on US stock exchanges (issuers) and their employ- country a signatory? ees, and non-US persons and companies, or anyone acting on their behalf, The United States is a signatory to and has ratified the OECD Anti-Bribery whose actions take place in whole or in part while in the territory of the Convention, the OAS Convention and the United Nations Convention United States (see question 14). against Corruption, all with reservations or declarations. The most signifi- cant reservations involve declining to specifically provide the private right Prohibited acts of action envisioned by the United Nations Convention against Corruption Prohibited acts include promises to pay, even if no payment is ultimately and not applying the illicit enrichment provisions of the OAS Convention. made. The prohibitions apply to improper payments made indirectly The United States is also a signatory to the Council of Europe Criminal by third parties or intermediaries, even without explicit direction by the Law Convention (Criminal Convention) but has not ratified it. principal.
2 Foreign and domestic bribery laws Corrupt intent Identify and describe your national laws and regulations Corrupt intent, described in the legislative history as connoting an evil prohibiting bribery of foreign public officials (foreign bribery motive or purpose, is readily inferred from the circumstances, from the existence of a quid pro quo, from conduct that violates local law and even laws) and domestic public officials (domestic bribery laws). from surreptitious behaviour. The principal US law prohibiting bribery of foreign public officials is the Foreign Corrupt Practices Act (FCPA), 15 USC sections 78m, 78dd-1, 78dd-2, Improper advantage 78dd-3, 78ff, enacted in 1977. The principal domestic public bribery law is 18 Added to the statute following the OECD Anti-Bribery Convention, an USC section 201, enacted in 1962. There are no implementing regulations ‘improper advantage’ does not require an actual action or decision by a for either statute, other than the regulations governing the Department of foreign official. Justice’s (DoJ) FCPA opinion procedure, under which the DoJ issues non- precedential opinions regarding its intent to take enforcement action in Business purpose response to specific inquiries. See 28 CFR part 80. A US court has confirmed that the ‘business purpose’ element (to obtain or retain business) is to be construed broadly to include any benefit to a Foreign bribery company that will improve its business opportunities or profitability. 3 Legal framework 4 Definition of a foreign public official Describe the elements of the law prohibiting bribery of a How does your law define a foreign public official? foreign public official. The FCPA defines a ‘foreign official’ as ‘any officer or employee of’ or ‘any The FCPA prohibits the following: person acting in an official capacity for or on behalf of’ ‘a foreign govern- • a covered person or entity; ment or any department, agency, or instrumentality thereof, or of a pub- • corruptly; lic international organization’ such as the World Bank. This can include • committing any act in furtherance of; part-time workers, unpaid workers, officers and employees of companies • an offer, payment, promise to pay or authorisation of an offer, payment with government ownership or control, as well as anyone acting under a or promise; delegation of authority from the government to carry out government • of money or anything of value to: responsibilities. US courts have held that determining whether an entity • any foreign official; is a government ‘instrumentality’ for the purposes of the FCPA requires a • any foreign political party or party official; ‘fact-specific analysis’. The US Court of Appeals for the Eleventh Circuit, • any candidate for foreign political office; or the only federal appellate court to have considered the issue, set forth a • any other person; two-part test for making such a determination: An entity is an ‘instru- • while ‘knowing’ that the payment or promise to pay will be passed on mentality’ if it is controlled by the government of a foreign country and to one of the above; performs a function that the controlling government treats as its own. The • for the purpose of: court then outlined a list of non-exhaustive factors that ‘may be relevant to • influencing an official act or decision of that person; deciding the issue’. • inducing that person to do or omit to do any act in violation of his First, to determine if the government of a foreign country controls an or her lawful duty; entity, courts and juries should look to: • inducing that person to use his or her influence with a foreign gov- • the government’s formal designation of the entity; ernment to affect or influence any government act or decision; or • whether the government has a majority interest; • securing any improper advantage; • the government’s ability to hire and fire the entity’s principals; • in order to obtain or retain business, or direct business to any person. • the extent to which the government profits or subsidises the entity; and See 15 USC sections 78dd-1(a), 78dd-2(a), 78dd-3(a). • the length of time these indicia have existed. www.gettingthedealthrough.com 239 UNITED STATES Miller & Chevalier Chartered
Second, to determine whether an entity performs a function that the 8 Individual and corporate liability government treats as its own, courts and juries should consider: Can both individuals and companies be held liable for bribery • whether the entity has a monopoly over the function; of a foreign official? • whether the government subsidises costs associated with the entity providing services; Both individuals and companies can be held liable for bribery of a foreign • whether the entity provides services to the public; and official. A corporation may be held liable (even criminally) for the acts of • whether the public and the government perceive the entity to be its employees in certain circumstances, generally where the employee acts performing a governmental function. within the scope of his or her duties and for the corporation’s benefit. A corporation may be found liable even when an employee is not and vice The FCPA also applies to ‘any foreign political party or official thereof or versa. In recent years, the DoJ has increasingly made the prosecution of any candidate for foreign political office’. individuals a cornerstone of its FCPA enforcement strategy.
5 Travel and entertainment restrictions 9 Civil and criminal enforcement To what extent do your anti-bribery laws restrict providing Is there civil and criminal enforcement of your country’s foreign officials with gifts, travel expenses, meals or foreign bribery laws? entertainment? There is civil and criminal enforcement of the United States’ foreign brib- The FCPA criminalises providing ‘anything of value’, including gifts, travel ery laws. See question 15. expenses, meals and entertainment, to foreign officials, where all the other requisite elements of a violation are met. 10 Agency enforcement In addition, less obvious items provided to ‘foreign officials’ can vio- What government agencies enforce the foreign bribery laws late the FCPA. For example, in-kind contributions, investment opportu- and regulations? nities, subcontracts, stock options, positions in joint ventures, favourable contracts, business opportunities, and similar items provided to ‘foreign Both the DoJ and SEC have jurisdiction to enforce the anti-bribery pro- officials’ are all things of value that can violate the FCPA. visions of the FCPA. The DoJ has the authority to enforce the FCPA The FCPA includes an affirmative defence, however, for reasonable criminally and, in certain circumstances, civilly; the SEC’s enforcement and bona fide expenses that are directly related to product demonstrations, authority is limited to civil penalties and remedies for violations by issuers tours of company facilities or ‘the execution or performance of a contract’ of certain types of securities regulated by the SEC. with a foreign government or agency. The defendant bears the burden of proving the elements of the asserted defence. 11 Leniency Guidance recently issued by the DoJ and Securities and Exchange Is there a mechanism for companies to disclose violations in Commission (SEC) underscores that anti-bribery violations require a cor- exchange for lesser penalties? rupt intent and states that ‘it is difficult to envision any scenario in which the provision of cups of coffee, taxi fare, or company promotional items The FCPA does not require self-reporting of FCPA violations. However, of nominal value would ever evidence corrupt intent’. The guidance also under US securities laws, including the Sarbanes-Oxley Act (SOX), corpo- notes that, under appropriate circumstances, the provision of benefits such rations are sometimes required to disclose improper payments or inter- as business-class airfare for international travel, modestly priced dinners, nal investigations into possible improper payments, thereby effectively tickets to a baseball game or a play would not create an FCPA violation. notifying or reporting to the government (see question 18). Following the enactment of SOX, the number of voluntary disclosures of actual or sus- 6 Facilitating payments pected FCPA violations has sharply increased. Do the laws and regulations permit facilitating or ‘grease’ Enforcement authorities encourage voluntary disclosure of actual or suspected violations and publicly assert that voluntary disclosure, and payments? subsequent cooperation with enforcement authorities, may influence the The FCPA permits ‘facilitating’ or ‘grease’ payments. This narrow excep- decision of whether to bring an enforcement action, the scope of any gov- tion applies to payments to expedite or secure the performance of ‘routine ernment investigation, and the choice of penalties sought to be imposed. governmental action[s]’, which are specifically defined to exclude actions In short, voluntary disclosure can result in more lenient treatment than involving the exercise of discretion. As such, the exception generally if the government were to learn of the violations from other sources. The applies only to small payments used to expedite the processing of permits, benefits of voluntary disclosure, however, are not statutorily guaranteed or licences, or other routine documentation; the provision of utility, police or quantified in advance by enforcement officials. mail services; or the performance of other non-discretionary functions. 12 Dispute resolution 7 Payments through intermediaries or third parties Can enforcement matters be resolved through plea In what circumstances do the laws prohibit payments through agreements, settlement agreements, prosecutorial discretion intermediaries or third parties to foreign public officials? or similar means without a trial? The FCPA prohibits making payments through intermediaries or third par- FCPA enforcement matters are most often resolved without a trial through ties while ‘knowing’ that all or a portion of the funds will be offered or pro- plea agreements, civil administrative actions and settlement agreements vided to a foreign official. ‘Knowledge’ in this context is statutorily defined such as deferred prosecution agreements (DPAs) and non-prosecution to be broader than actual knowledge: a person is deemed to ‘know’ that a agreements (NPAs). As a matter of prosecutorial discretion, some inves- third party will use money provided by that person to make an improper tigations or disclosures are not pursued. While once rare, with the recent payment or offer if he or she is aware of, but consciously disregards, a ‘high uptick in the prosecution of individuals, jury trials are becoming more probability’ that such a payment or offer will be made. The DoJ and SEC frequent. have identified a number of ‘red flags’ – circumstances that, in their view, suggest such a ‘high probability’ of a payment – and in recent years, there 13 Patterns in enforcement has been a significant uptick in the number of FCPA-related enforcement Describe any recent shifts in the patterns of enforcement of the actions involving third-party intermediaries. foreign bribery rules. The pace of FCPA enforcement accelerated greatly over the past decade, with the number of enforcement actions brought by the DoJ and SEC reaching record heights in 2010. Since 2010, the number of FCPA disposi- tions resolved annually, while still historically high, has fallen from a peak of over 70 to approximately 30 a year. However, the sanctions imposed in recent years have become much more severe, with monetary penalties
240 Getting the Deal Through – Anti-Corruption Regulation 2015 Miller & Chevalier Chartered UNITED STATES
(including fines, disgorgement of profits and payment of pre-judgment Civil penalties interest) significantly eclipsing those imposed by earlier FCPA settle- Corporations and individuals can be civilly fined up to US$10,000 per anti- ments. In 2014, the average combined corporate settlement exceeded bribery violation. In addition, the SEC or the DoJ may seek injunctive relief US$156 million, US$67.5 million more than in any prior year. In addition to enjoin any act that violates or may violate the FCPA. The SEC may also to monetary penalties, companies are now frequently required either to order disgorgement of ill-gotten gains and assess pre-judgment interest. retain independent compliance monitors, usually for a period of two to Since 2008, US enforcement authorities have imposed over US$5 bil- three years, or to agree to self-monitor and file periodic progress reports lion in criminal and civil fines, disgorgement, and pre-judgment interest with US enforcement agencies for an equivalent length of time. In recent in connection with FCPA enforcement actions, including 11 cases in which years, the agencies have also introduced a hybrid approach that imposes the combined penalties exceeded US$100 million. an abbreviated monitorship, generally ranging from a year to 18 months, followed by a similarly abbreviated period of self-monitoring and self- Collateral sanctions reporting. Companies entering into DPAs or NPAs typically submit to In addition to the statutory penalties, firms may, upon indictment, face probationary periods under these agreements. Individuals have increas- suspension and debarment from US government contracting, loss of ingly been targets of prosecution and have been sentenced to prison terms, export privileges and loss of benefits under government programmes, such fined heavily, or both. Since 2011, over 60 individuals have either been as financing and insurance. The SEC and the DoJ also generally require criminally or civilly charged with or convicted of FCPA-related violations. companies to implement detailed compliance programmes and appoint Many recent prosecutions have been based on expansive interpretations independent compliance monitors (who report to the US government) of substantive and jurisdictional provisions of the FCPA, and foreign enti- and/or self-monitor for a specified period in connection with the settle- ties have been directly subjected to US enforcement actions. US authori- ment of FCPA matters. ties have also targeted specific industries for enforcement, including the oil and gas, the medical device and the pharmaceutical industries and, most 16 Recent decisions and investigations recently, the financial industry. Identify and summarise recent landmark decisions or SOX has encouraged voluntary disclosures, and a number of recent investigations involving foreign bribery. cases have arisen in the context of proposed corporate transactions. US enforcement agencies have also benefited from the cooperation of US enforcement authorities resolved 32 FCPA-related enforcement actions their counterparts overseas; including coordination that has contrib- in 2014, which, while high by historical standards, is a significant drop from uted to some of the most high-profile DoJ enforcement activities to date. a enforcement peak of over 70 in 2010. Despite this overall downward Enforcement agencies’ expectations for compliance standards continue to trend, the level of enforcement activity against individuals (as opposed rise, as reflected in the compliance obligations imposed on companies in to corporations) has only dipped slightly over this period and actually saw recent settlements. an uptick in 2013, with the DoJ filing FCPA-related charges against 15 indi- viduals in 2013 compared with only six in 2012. This is indicative of the 14 Prosecution of foreign companies agencies’ continued emphasis on the prosecution of individuals and may In what circumstances can foreign companies be prosecuted explain, in part, why overall enforcement has declined, since individuals for foreign bribery? are much more likely to demand trials that divert the agencies’ limited resources. It is also worth noting that while the pace of FCPA enforcement A foreign company that is listed on a US stock exchange or raises capital has slowed to around 30 enforcement actions a year, the size and scope through US capital markets, and is thus an ‘issuer’, may be prosecuted for of these settlements is increasing, with the average combined corporate violations of the anti-bribery provisions if it uses any instrumentality of US settlement exceeding US$156 million in 2014. Below is a sampling of commerce in taking any action in furtherance of a payment or other act recent cases that illustrates these and other trends in FCPA enforcement: prohibited by the FCPA. Any foreign person or foreign company, whether or not an ‘issuer’, Alstom SA settlement may be prosecuted under the FCPA if it commits (either directly or indi- On 22 December 2014, the French power and transportation company rectly) any act in furtherance of an improper payment ‘while in the territory Alstom SA entered into a settlement with the DoJ, agreeing to pay a record- of the United States’. setting US$772 million criminal penalty to resolve charges related to a Recent guidance from the DoJ and SEC also asserts that a foreign com- decades-long bribery scheme the company allegedly operated in multi- pany may be held liable for aiding and abetting an FCPA violation (18 USC, ple countries throughout the world. As part of the settlement, Alstom section 2, or 15 USC sections 78t(e) and u-3(a)) or for conspiring to violate SA pleaded guilty to criminal books and records and internal controls the FCPA (18 USC, section 371), even if the foreign company did not take violations of the FCPA, despite the fact that the company ceased to be a any act in furtherance of the corrupt payment while in the territory of the US issuer in 2004. In addition, the company’s Swiss subsidiary Alstom United States. In conspiracy cases, the United States generally has asserted Network Schweiz AG pleaded guilty to conspiring to violate the anti- jurisdiction over all the conspirators where at least one conspirator is an bribery provisions of the statute, and its US subsidiaries Alstom Power issuer, domestic concern, or commits a reasonably foreseeable overt act Inc and Alstom Grid Inc entered into deferred prosecution agreements within the United States. to resolve charges that they likewise conspired to violate the FCPA’s anti-bribery provisions. 15 Sanctions According to the settlement documents, executives and employees What are the sanctions for individuals and companies violating of Alstom and its subsidiaries paid more than US$75 million in bribes to the foreign bribery rules? government officials as a means to securing approximately US$4 billion in power, grid and transportation projects for state-owned entities in a range Criminal and civil penalties may be imposed on both individuals and cor- of countries, including in Indonesia, Egypt, Saudi Arabia, the Bahamas porations for violations of the FCPA’s anti-bribery provisions. and Taiwan. The bribes, which reportedly netted Alstom around US$300 million in profit, were provided in a variety of forms, including monetary Criminal penalties for wilful violations payments, gifts, travel, entertainment, the hiring of family members, Corporations can be fined up to US$2 million per anti-bribery violation. and a donation to a charity associated with an official. In many instances, Actual fines can exceed this maximum under alternative fine provisions the company sought to conceal the illicit payments by channelling them of the Sentencing Reform Act (18 USC section 3571(d)), which allow a cor- through third parties, including consultants with no relevant expertise poration to be fined up to an amount that is the greater of twice the gross or experience, whose services were unnecessary, and who were retained pecuniary gain or loss from the transaction enabled by the bribe. Individuals without meaningful scrutiny. The settlement documents cite a host of fac- can face fines of up to US$100,000 per anti-bribery violation or up to five tors considered by the DoJ in determining the size of penalty to impose, years’ imprisonment, or both. Likewise, under the alternative fine provi- including the breadth of the misconduct, the failure to voluntarily disclose, sions of the Sentencing Reform Act, individuals may also face increased the initial refusal to fully cooperate with the investigation, and the lack of fines of up to US$250,000 per anti-bribery violation or the greater of twice an effective compliance and ethics program at the time of the misconduct. the gross pecuniary gain or loss the transaction enabled by the bribe. In recognition of monitoring requirements imposed on Alstom by the World Bank in February 2012, the DoJ did not impose a corporate monitor www.gettingthedealthrough.com 241 UNITED STATES Miller & Chevalier Chartered on Alstom as a condition of its settlement. The plea agreement states, the six aforementioned executives as well as a former CFO for Siemens however, that if the World Bank’s Integrity Compliance Office ‘does not Business Services. The charges came three years after Siemens AG, along certify that [Alstom] has satisfied the monitoring requirements contained with several subsidiaries, entered into settlements with the SEC, DoJ and in [the Company’s] World Bank Resolution, the Company shall be required General Prosecutor’s Office in Munich over some of the same underly- to retain an Independent Compliance Monitor’. In announcing Alstom’s ing conduct and agreed to pay US$1.6 billion in combined penalties and settlement, the DoJ thanked authorities from nine other countries for their disgorgement. The current pleadings allege that, from 1996 to 2007, the ‘significant cooperation’, many of which are reportedly conducting their defendants, with the help of intermediaries, conspired to pay more than own investigations into the misconduct. US$100 million in bribes to Argentinian government officials, initially to To date, the DoJ has also charged four Alstom executives with secure a contract to replace Argentina’s national identity cards, then to get FCPA-related violations in connection with their roles in the scheme, the project reinstated after it was terminated, and finally as part of an effort including: Frederic Pierucci, a French citizen and Alstom Power’s former to recoup revenues that would have been due under the contract. vice-president of global boiler sales, who pleaded guilty on 29 July 2013, The co-conspirators allegedly used a variety of mechanisms to generate to both violating and conspiring to violate the FCPA; David Rothschild, funds and conceal payments, including offshore companies, ‘sham’ invoices Alstom Power’s former vice-president of regional sales, who pleaded guilty and contracts for services never performed, and off-books accounts. The on 2 November 2012, to conspiring to violate the FCPA; William Pomponi, agencies asserted jurisdiction over the matter on the basis of payments Alstom Power’s former vice-president of regional sales, who pleaded guilty channelled through US bank accounts, meetings relevant to the alleged on 17 July 2014, to conspiring to violate the FCPA; and Lawrence Hoskins, conspiracy taking place in the United States and Siemens AG’s status as a UK citizen and Alstom SA’s former senior vice-president for the Asia a US issuer. The charges brought by the DoJ and SEC included a mix of region, who is contesting the charges against him and is currently sched- civil and criminal counts (both substantive and conspiracy) related to the uled to stand trial in June 2015. On 4 December 2014, the DoJ also secured FCPA’s anti-bribery and accounting provisions and money-laundering and a guilty plea from Asem Elgawhary, the general manager of an entity wire fraud statutes. working on behalf of the Egyptian Electricity Holding Company, Egypt’s On the SEC side, several of the defendants chose to settle the civil state-owned electricity company, on non-FCPA charges based on some counts filed against them, including Bernd Regendantz, the former CFO of the same underlying conduct. Under his plea agreement, Elgawhary of Siemens Business Services who agreed to pay a US$40,000 fine in was sentenced to 42 months in prison and had to forfeit approximately December 2011, Uriel Sharef, the former member of the Siemens manage- US$5.2 million in proceeds associated with the misconduct. ment board who agreed to pay a US$275,000 fine in April 2013, and Andres R Truppel, the former CFO of Siemens Argentina, who agreed to pay a Terra Telecommunications executives US$80,000 fine in February 2014. In contrast to Regendantz, Sharef and On 25 October 2011, Joel Esquenazi, the former president of Terra Truppel, Herbert Steffen, the former CEO of Siemens Argentina, filed a Telecommunications Corporation, was sentenced to 15 years in prison for motion to dismiss the SEC’s charges against him, contending that the court his role in a conspiracy to pay and conceal bribes to employees of Haiti’s lacked personal jurisdiction over him and that the SEC’s claims were time- state-owned telecommunication company, Telecommunications D’Haiti barred under the FCPA’s five-year statute of limitations. In February 2013, (Haiti Teleco). Former Terra executive vice-president Carlos Rodriguez the US District Court for the Southern District of New York dismissed the was also sentenced to seven years in prison for his participation in the civil charges against Steffen on the grounds that it had no personal juris- scheme. Esquenazi and Rodriguez were convicted at trial in August 2011. diction over him because Steffen’s alleged misconduct was ‘far too attenu- According to the indictment, Esquenazi and Rodriguez authorised ated’ from the resulting effect in the US to satisfy the applicable minimum bribes to Haiti Teleco officials to secure business advantages for Terra, contacts standard, as Steffen ‘neither authorized the bribe, nor directed which included preferential telecommunications rates, a reduced num- the cover-up, much less played any role in the falsified filings’ made by ber of minutes for which payment was owed (effectively reducing the Siemens under relevant SEC rules. per-minute rate), and a variety of credits toward sums owed. Thereafter, In October 2013, the SEC voluntarily dismissed the civil counts against Esquenazi and Rodriguez allegedly caused Terra to falsely record the Carlos Sergi, a former Siemens Argentina board member, while moving bribes as ‘commissions’ or ‘consulting fees’ on financial, banking and for default judgment against the remaining defendants, including Truppel accounting documents. (a move that probably precipitated his settlement). In February 2014, the In addition to their prison terms, Esquenazi and Rodriguez were District Court entered a default judgment against the last two defend- also ordered to pay a total assessment of US$2,100 and restitution ants, Ulrich Bock and Stephan Signer, two former executives of Siemens of US$2.2 million, the latter jointly and severally among Esquenazi, Business Services who were ordered to pay a combined US$1.46 million in Rodriguez and another Haiti Teleco defendant, Juan Diaz (an intermedi- fines and disgorgement. ary used by Terra who was sentenced to 57 months in prison in June 2010 On the DoJ side, there have been no developments, with most defend- after pleading guilty to conspiring to violate the FCPA and commit money- ants reportedly choosing to ignore the indictment. Since the defendants laundering). Both Esquenazi and Rodriquez appealed their convictions to are not US citizens and all reside outside of the United States, US authori- the US Court of Appeals for the Eleventh Circuit, contesting Haiti Teleco’s ties would need to obtain their extradition to move forward with the pros- designation as an ‘instrumentality’ under the FCPA. In May 2014, the ecution, a possibility the United States has reportedly explored without Eleventh Circuit upheld Esquenazi’s and Rodriquez’s convictions, find- any apparent success. ing that Haiti Teleco qualified as an ‘instrumentality’ of the Haitian gov- ernment for the purposes of the FCPA. The ruling is significant because Financial record keeping the Eleventh Circuit is the first federal appellate court to define the term 17 Laws and regulations ‘instrumentality’ under the FCPA, and the court largely accepted the DoJ’s definition of the term, holding ‘instrumentality’ to mean any ‘entity con- What legal rules require accurate corporate books and records, trolled by the government of a foreign country that performs a function the effective internal company controls, periodic financial controlling government treats as its own’ and providing a non-exhaustive statements or external auditing? list of factors that are suggestive of instrumentality status. The FCPA, in addition to prohibiting foreign bribery, requires issuers to keep accurate books and records and to establish and maintain a system of Former executives, employees and contractors of Siemens internal controls adequate to ensure accountability for assets. Specifically, On 13 December 2011 the DoJ charged eight former employees and con- the accounting provisions require issuers to make and keep books, records tractors of Siemens Aktiengesellschaft (Siemens AG) and its Argentinian and accounts, which, in reasonable detail, accurately and fairly reflect subsidiary, Siemens SA (Siemens Argentina) for their roles in an alleged the transactions and dispositions of the issuers’ assets. Issuers must also scheme to secure, implement and recoup the profits from a US$1 billion devise and maintain a system of internal accounting controls that assures contract with the Argentinian government. The defendants include a for- that transactions are executed and assets are accessed only in accordance mer member of the Siemens management board and the central executive with management’s authorisation; that accounts of assets and existing committee of Siemens AG, five former executives of Siemens Argentina assets are periodically reconciled; and that transactions are recorded so and Siemens Business Services, and two facilitators allegedly used by the as to allow for the preparation of financial statements in conformity with executives to pass payments to government officials. In a parallel proceed- GAAP standards. Issuers are strictly liable for the failure of any of their ing related to the same allegations, the SEC also brought charges against
242 Getting the Deal Through – Anti-Corruption Regulation 2015 Miller & Chevalier Chartered UNITED STATES owned or controlled foreign affiliates to meet the books and records and 21 Tax-deductibility of domestic or foreign bribes internal controls standards for the FCPA. Do your country’s tax laws prohibit the deductibility of SOX imposes reporting obligations with respect to internal controls. domestic or foreign bribes? Issuer CEOs and CFOs (signatories to the financial reports) are directly responsible for and must certify the adequacy of both internal controls US tax laws prohibit the deductibility of domestic and foreign bribes. See and disclosure controls and procedures. Management must disclose all 26 USC section 162(c)(1). ‘material weaknesses’ in internal controls to the external auditors. SOX also requires that each annual report contain an internal control report and Domestic bribery an attestation by the external auditors of management’s internal control assessment. SOX sets related certification requirements (that a report fairly 22 Legal framework presents, in all material respects, the financial condition and operational Describe the individual elements of the law prohibiting bribery results) and provides criminal penalties for knowing and wilful violations. of a domestic public official. The securities laws also impose various auditing obligations, require that the issuer’s financial statements be subject to external audit and The domestic criminal bribery statute prohibits: specify the scope and reporting obligations with respect to such audits. • directly or indirectly; SOX also established the Public Company Accounting Oversight Board • corruptly giving, offering or promising; (PCAOB) and authorised it to set auditing standards. • something of value; • to a public official; 18 Disclosure of violations or irregularities • with the intent to influence an official act.
To what extent must companies disclose violations of anti- See 18 USC section 201(b)(1). bribery laws or associated accounting irregularities? The accounting provisions of the FCPA do not themselves require disclo- ‘Directly or indirectly’ sure of a violation (see question 11). US securities laws do, however, pro- The fact that an individual does not pay a bribe directly to a public official, hibit ‘material’ misstatements and otherwise may require disclosure of a but rather does so through an intermediary, does not allow that individual violation of anti-bribery laws. The mandatory certification requirements of to evade liability. SOX can also result in the disclosure of violations. ‘Something of value’ 19 Prosecution under financial record keeping legislation ‘Anything of value’ can constitute a bribe. Accordingly, a prosecutor does not have to establish a minimum value of the bribe in order to secure a con- Are such laws used to prosecute domestic or foreign bribery? viction. Rather, it is enough that the item or service offered or solicited has Although part of the FCPA, the accounting provisions are not limited to some subjective value to the public official. violations that occur in connection with the bribery of foreign officials. Rather, they apply generally to issuers and can be a separate and independ- ‘Public official’ ent basis of liability. Accordingly, there have been many cases involving The recipient may be either a ‘public official’ or a person selected to be a violations of the record keeping or internal controls provisions of the FCPA public official (see question 24). that are wholly unrelated to foreign bribery. At the same time, charges of violations of the accounting provisions ‘Official act’ are commonly found in cases involving the bribery of foreign officials. In The prosecutor must prove that the bribe was given or offered in exchange situations in which there is FCPA jurisdiction under the accounting provi- for the performance of a specific official act – in other words, a quid pro sions but not the anti-bribery provisions, cases have been settled with the quo. An ‘official act’ includes duties of an office or position, whether or not SEC under the accounting provisions with no corresponding resolution statutorily prescribed. For members of Congress, for example, an ‘official under the anti-bribery provisions. act’ is not strictly confined to legislative actions (such as casting a vote), but can encompass a congressman’s attempt to influence a local official on a 20 Sanctions for accounting violations constituent’s behalf. What are the sanctions for violations of the accounting rules 23 Prohibitions associated with the payment of bribes? Does the law prohibit both the paying and receiving of a bribe? For accounting violations of the FCPA, the SEC may impose civil penalties, seek injunctive relief, enter a cease and desist order and In addition to punishing the payment of a bribe, the federal bribery statute require disgorgement of tainted gains. Civil fines can range from either prohibits public officials and those who are selected to be public officials US$5,000 to US$100,000 per violation for individuals and US$50,000 to from either soliciting or accepting anything of value with the intent to US$500,000 per violation for corporations or the gross amount of pecuni- be influenced in the performance of an official act (see 18 USC section ary gain per violation. Neither materiality nor ‘knowledge’ is required to 201(b)(2)). establish civil liability: the mere fact that books and records are inaccurate, or that internal accounting controls are inadequate, is sufficient. Through 24 Public officials its injunctive powers, the SEC can impose preventive internal control and How does your law define a public official and does that reporting obligations. definition include employees of state-owned or state- The DoJ has authority over criminal accounting violations. Persons controlled companies? may be criminally liable under the accounting rules if they ‘knowingly circumvent or knowingly fail to implement a system of internal accounting The bribery statute broadly defines ‘public official’ to include members controls or knowingly falsify any book, record, or account’ required to be of Congress, any person ‘selected to be a public official’ (ie, any person maintained under the FCPA. nominated or appointed, such as a federal judge), officers and employees Penalties for criminal violations of the FCPA’s accounting provisions of all branches of the federal government, as well as federal jurors. An are the same penalties applicable to other criminal violations of the securi- individual need not be a direct employee of the government to qualify as ties laws. ‘Knowing and wilful’ violations can result in fines up to US$25 a public official, as the statute includes in its definition ‘a person acting for million for corporations and US$5 million for individuals, along with up or on behalf of the United States’. The Supreme Court has explained this to 20 years’ imprisonment. Like the anti-bribery provisions, however, the to mean someone who ‘occupies a position of public trust with official fed- accounting provisions are also subject to the alternative fine provisions eral responsibilities’. In the spirit of this expansive definition, courts have (see question 15). deemed a warehouseman employed at an airforce base, a grain inspector licensed by the Department of Agriculture, and an immigration detention centre guard employed by a private contractor as falling within the ambit of ‘public official’. www.gettingthedealthrough.com 243 UNITED STATES Miller & Chevalier Chartered
Because the bribery statute applies only to the bribery of federal pub- prohibited from soliciting or accepting anything of monetary value, includ- lic officials, officials of the various state governments are exempt from ing gifts, travel, lodging or meals from a ‘prohibited source’, that is, anyone the statute’s reach. However, there are other federal statutory provi- who does or seeks to do business with the employee’s agency, performs sions which can be used to prosecute bribery of state public officials, as activities regulated by the employee’s agency, seeks official action by the well as those attempting to bribe them. Specifically, the federal mail and employee’s agency, or has interests that may be substantially affected by wire fraud statutes prohibit the use of the mail system, phone or internet the performance or non-performance of the employee’s official duties. to carry out a ‘scheme to defraud’, which includes a scheme to deprive Unlike the criminal gratuities statute, which requires some connection another of ‘honest services’. Under these provisions, state public officials with a specific official act, the executive branch gift regulations can be who solicit bribes, and private individuals who offer them, can be pros- implicated even where the solicitation of a gift from an prohibited source ecuted for defrauding the state’s citizens of the public official’s ‘honest is unconnected to any such act. In addition, federal employees may not services’ (bribery of federal public officials can also be prosecuted under accept gifts having an aggregate market value of US$20 or more per occa- the same theory). In addition, the bribing of state public officials is also sion, and may not accept gifts having an aggregate market value of more prohibited by the laws of each state. than US$50 from a single source in a given year. Limited exceptions exist for certain de minimis gifts, such as gifts motivated by a family relation- 25 Public official participation in commercial activities ship. However, the gift rules are even stricter for presidential appointees: Can a public official participate in commercial activities while under an executive order signed by President Obama, executive branch officials appointed by the president cannot accept any gifts from registered serving as a public official? lobbyists, even those having a market value of less than US$20. The extent to which public officials may earn income from outside com- Under the Rules of the Senate and House of Representatives, mem- mercial activities while serving as a public official varies by branch of bers of Congress may not accept a gift (which includes travel or lodging) government (see 5 USC App 4 sections 501–502). At present, members of worth US$50 or more, or multiple gifts from a single source that total Congress are prohibited by statute from earning more than US$26,955 in US$100 or more, for a given calendar year. These limits also apply to gifts outside income. Members of Congress are also prohibited by statute from to relatives of a member, donations by lobbyists to entities controlled by receiving any compensation from an activity that involves a fiduciary rela- a member, donations made to charities at a member’s request and dona- tionship (eg, attorney–client) or from serving on a corporation’s board of tions to a member’s legal defence fund. Importantly, the US$50 gift excep- directors. With respect to the executive branch, presidential appointees tions are not available to registered lobbyists, entities that retain or employ subject to Senate confirmation (senior non-career personnel) – such as lobbyists, or agents of a foreign government (but the foreign government cabinet secretaries and their deputies – are prohibited by executive order itself may still provide such gifts). A member of Congress is wholly prohib- from earning any outside income whatsoever. Senior-level, non-career ited from receiving a gift of any kind from a registered lobbyist and their presidential appointees who are not subject to Senate confirmation may affiliates. In addition, members are prohibited from receiving reimburse- earn up to US$26,955 in outside income per year and may not receive ment or payment in kind for travel when accompanied by a registered compensation from any activity involving a fiduciary relationship. Career lobbyist, or for trips that have been organised by a lobbyist. The House of civil servants in the executive branch who are not presidential appointees Representatives specifically bars members from accepting refreshments are not subject to any outside earned income cap. However, no executive from lobbyists in a one-on-one setting. Registered lobbyists can face up branch employee – whether a presidential appointee or not – may engage in to a five-year prison term for knowingly providing gifts to members of outside employment that would conflict with his or her official duties. For Congress in violation of either the House or Senate ethics rules. example, a civil servant working for an agency that regulates the energy industry may not earn any outside income from work related to the energy 27 Gifts and gratuities industry. Are certain types of gifts and gratuities permissible under your domestic bribery laws and, if so, what types? 26 Travel and entertainment Describe any restrictions on providing domestic officials As noted in question 26, members of Congress may accept gifts that are worth less than US$50 (except from lobbyists or agents of a foreign gov- with gifts, travel expenses, meals or entertainment. Do the ernment, from whom they are prohibited from accepting any gifts), but the restrictions apply to both the providing and receiving of such aggregate value of such gifts from a single source in a given calendar year benefits? must be less than US$100. In addition to gifts under the US$50 dollar limit, The giving of gifts, or ‘gratuities’, to public officials is regulated by a federal the House and Senate Rules exempt from the restrictions on gifts contri- criminal statute applicable to all government officials and by regulations butions to a member’s campaign fund, food and refreshments of nominal promulgated by each branch of government that establish specific gift value other than a meal, and informational materials like books and vide- and travel rules for its employees. The criminal gratuities statute applies otapes, among other low-value items. Finally, the House and Senate ethics to those who either provide or receive improper gifts, while the regula- rules also contain a ‘widely attended event’ exception that allows mem- tions apply only to the receiving of gifts. However, ethics reform legisla- bers (and their staffers) to attend sponsored events, free of charge, where at tion enacted in 2007 now makes it a crime for registered lobbyists and least 25 non-congressional employees will be in attendance and the event organisations that employ them to knowingly provide a gift to a member of relates to their official duties. Congress that violates legislative branch ethics rules. The executive branch regulations similarly allow for nominal gifts, The statutory provision that prohibits the payment and solicitation such as those having a market value of US$20 or less (although presidential of gratuities (18 USC section 201(c)) is contained within the same section appointees may not accept any gift from a registered lobbyist), gifts based that prohibits bribery (18 USC section 201(b)). The basic elements of an on a personal relationship and honorary degrees. De minimis items such illegal gratuities violation overlap substantially with the elements of brib- as refreshments and greeting cards are also excluded from the definition ery, except that a gratuity need not be paid with the intent to influence the of ‘gift.’ Like the House and Senate Rules, the executive branch regula- public official. Rather, a person can be convicted of paying an illegal gratu- tions also contain a ‘widely attended gathering’ exception, although a key ity if he or she gives or offers anything of value to the public official ‘for or difference is that the employing agency’s ethics official must provide the because of any official act’ performed or to be performed by the official. employee with a written finding that the importance of the employee’s For example, a gift given to a senator as an expression of gratitude for pass- attendance to his or her official duties outweighs any threat of improper ing favourable legislation could trigger the gratuities statute, even if the gift influence. The executive branch regulations also permit officials travelling was not intended to influence the senator’s actions (since it was given after abroad on official business to accept food and entertainment, as long as the legislation was already passed). it does not exceed the official’s per diem and is not provided by a foreign In addition to the federal criminal gratuities statute, each branch of government. Under an executive order signed by President Obama, how- government regulates the extent to which its employees may accept gifts ever, neither the widely attended gathering exception nor the exception from outside sources. In effect, these regulations prohibit government offi- for food and entertainment in the course of foreign travel are available to cials from accepting certain gifts that would otherwise not be prohibited presidential appointees. by the criminal gratuities statute. With respect to the executive branch regulations, employees of any executive branch department or agency are
244 Getting the Deal Through – Anti-Corruption Regulation 2015 Miller & Chevalier Chartered UNITED STATES
28 Private commercial bribery Senior presidential appointees and members of Congress who violate Does your country also prohibit private commercial bribery? the statute regulating outside earned income can face a civil enforcement action, which can result in a fine of US$10,000 or the amount of compen- Private commercial bribery is prohibited primarily by various state laws, sation received, whichever is greater. Government employees who vio- among which there is considerable variation. New York, for example, late applicable gift and earned income regulations can face disciplinary has a broad statute that makes it an offence to confer any benefit on an action by their employing agency or body. Registered lobbyists can face employee, without the consent of his employer, with the intent to influence up to a five-year prison term for knowingly providing gifts to members of the employee’s professional conduct. Congress in violation of either the House or Senate ethics rules. While there is no federal statute that specifically prohibits commercial bribery, there are a handful of statutes that can be used by prosecutors to 30 Facilitating payments prosecute commercial bribery cases. First, the mail and wire fraud statutes Have the domestic bribery laws been enforced with respect to prohibit the use of the mail system, phone or internet to carry out a ‘scheme facilitating or ‘grease’ payments? to defraud’, which includes a scheme to deprive another of ‘honest ser- vices’. A bribe paid to an employee of a corporation has been classified as a The domestic bribery statute does not contain an exception for grease scheme to deprive the corporation of the employee’s ‘honest services’, and payments. The statute covers any payment made with the intent to ‘influ- thus can be prosecuted under the mail and wire fraud statutes. ence an official act’ and the statutory term ‘official act’ includes non- Second, the so-called ‘federal funds bribery statute’ prohibits the discretionary acts. Courts have held, however, that if an official demands payment of bribes to any organisation – which can include a private com- payment to perform a routine duty, a defendant may raise an economic pany – that in any one year receives federal funds in excess of US$10,000, coercion defence to the bribery charge. whether through a grant, loan, contract or otherwise. Finally, a federal statute known as the ‘Travel Act’ makes it a federal 31 Recent decisions and investigations criminal offence to commit an ‘unlawful act’ – which includes violating Identify and summarise recent landmark decisions and state commercial bribery laws – if the bribery is facilitated by travelling in investigations involving domestic bribery laws, including any interstate commerce or using the mail system. Thus, if an individual travels from New Jersey to New York in order to effectuate a bribe, that individual investigations or decisions involving foreign companies. can be prosecuted under the federal Travel Act for violating New York’s As noted in the answer to question 24, the federal bribery statute does not commercial bribery law. A violation of the Travel Act based on violating a apply directly to state public officials. However, other federal laws can be state commercial bribery law can result in a prison term of five years and used to reach the actions of state officials engaged in corruption. A recent a fine. Finally, commercial bribery is also actionable as a tort in the civil prominent action against former Virginia governor Bob McDonnell and court system. his wife Maureen illustrates this point. In September 2014, a federal jury convicted the McDonnells of multiple counts of both conspiracy and 29 Penalties and enforcement substantive ‘honest services’ wire fraud for accepting monetary and other What are the sanctions for individuals and companies violating gifts from a prominent local businessman in exchange for official acts and the domestic bribery rules? the prestige of the governor’s office, which defrauded the state’s citizens of the governor’s ‘honest services’. On 6 January 2015, a federal judge Both the provider and recipient of a bribe in violation of the federal bribery sentenced Bob McDonnell to two years in prison, substantially less than statute can face up to 15 years’ imprisonment. Moreover, either in addition the six-and-a-half-year term sought by prosecutors. His wife Maureen is to or in lieu of a prison sentence, individuals who violate the bribery stat- scheduled to be sentenced on 20 February 2015. ute can be fined up to the greater of US$250,000 (US$500,000 for organi- sations) or three times the monetary equivalent of the bribe. Under the gratuities statute, the provider or recipient of an illegal gratuity is subject to up to two years’ imprisonment or a fine of up to US$250,000 (US$500,000 for organisations) or both.
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Venezuela
Carlos Domínguez-Hernández and Fernando Peláez-Pier Hoet Peláez Castillo & Duque
1 International anti-corruption conventions inherent to the exercise of their public attributions. The penalty determined To which international anti-corruption conventions is your for such crime ranges between six and 12 years of prison. Concerning International Treaties, Venezuela is a signatory to the country a signatory? United Nations Convention against Corruption and the OAS Inter-American The Inter-American Convention against Corruption was signed and rati- Convention against Corruption, whose regulations also cover bribery of a fied by Venezuela. The United Nations Convention against Corruption has foreign public official. also been signed and ratified by Venezuela. Venezuela has also signed the United Nations Convention against Transnational Organized Crime. 4 Definition of a foreign public official How does your law define a foreign public official? 2 Foreign and domestic bribery laws The Venezuelan Law against Corruption does not provide a formal defini- Identify and describe your national laws and regulations tion of foreign public official. However, article 85 refers to foreign public prohibiting bribery of foreign public officials (foreign bribery officials as public officials from other countries, which leads to the inter- laws) and domestic public officials (domestic bribery laws). pretation that the same definition of domestic public officials applies to The main anti-corruption and bribery law In Venezuela is the Law against foreign public officials with the addition that they are from a different Corruption (the Law), which came into force on 19 November 2014. country. The Law includes provisions against bribery, attempted bribery, collu- sion and illegal enrichment by public servants. The Law also criminalises 5 Travel and entertainment restrictions the receipt of extraordinary or valuable gifts by public officials even when To what extent do your anti-bribery laws restrict providing no bribery is involved. Also, it refers to bribery of foreign public officials, as foreign officials with gifts, travel expenses, meals or it has been regulated by article 85. entertainment? To be classified as a crime, the law provides that the gift, profit or retribution is received or promised in exchange for the performance or Article 85 prohibits giving any type of gifts or favours to foreign officials in omission of acts contrary to the duties of the public official. Delivery of order for them to omit or execute an action inherent to their attributions. gifts, gratuities or courtesies without an intent to have the public officials Because of this, the law prohibits any type of gift for foreign official as long take or omit a specific action within their duties does not constitute bribery as the objective thereof is to have them omit or execute an action inherent under the Law. to their attributions. The Law defines: public official, and provides the duty and procedure for public officials to give sworn statements on their assets or equity upon 6 Facilitating payments entering and leaving public service; specific corruption-related crimes Do the laws and regulations permit facilitating or ‘grease’ including bribery, illegal enrichment, collusion, etc; certain administrative payments? violations; and the role of the National Comptroller’s Office as the oversee- ing entity at the administrative level and of the Public Prosecutor’s Office About facilitating or grease payments, article 85 expressly states the as the entity in charge of judicial or criminal investigation, prosecution and prohibition of any type of payments, either direct or non-direct payments, enforcement of the law. by Venezuelan citizens or individuals whose permanent residence is estab- From a constitutional perspective, corruption-related crimes are not lished in Venezuela and Corporations domiciled in the country. subject to statutes of limitations and those accused of committing corrup- Nevertheless, since facilitation of payments has been defined by tion-related crimes are not entitled to any benefits, privileges or procedural The Organisation for Economic Co-operation and Development (OECD) advantages. as those minor payments made to a public servant in order to expedite a The following laws also govern corruption in Venezuela: the Law determined procedure, this action does not entail refraining or exceeding against Organised Crime, the Organic Law of the Republic’s Comptroller in the exercise of public attributions or an advantage for one of the parties. General and of the National Fiscal Control System, the Public Function Venezuelan laws have not regulated these payments since the concept Statute and the Code of Ethics of the Public Servant. of facilitating payments does not cover the circumstance described in the There are a number of resolutions and other acts that have an impact article above. on domestic public officials, such as the Public Procurement Laws and the Organic Law for Citizens’ Power. 7 Payments through intermediaries or third parties In what circumstances do the laws prohibit payments through Foreign bribery intermediaries or third parties to foreign public officials? 3 Legal framework Details on payments to foreign public officials through intermediaries or Describe the elements of the law prohibiting bribery of a third parties are also described in article 85 of the Law against Corruption, foreign public official. as it prohibits indirect payments to foreign public servants through an intermediary. Article 85 of the Law against Corruption exposes the responsibility of those In addition, the international anti-corruption conventions establish who bribe foreign public officials so that they perform or omit an action that promising or giving a foreign public official a bribe directly or indi- rectly through a citizen or persons with permanent residence in the foreign
246 Getting the Deal Through – Anti-Corruption Regulation 2015 Hoet Peláez Castillo & Duque VENEZUELA country, or through companies domiciled in such foreign country, must 14 Prosecution of foreign companies also be prohibited and punished by the member countries. In what circumstances can foreign companies be prosecuted for foreign bribery? 8 Individual and corporate liability Can both individuals and companies be held liable for bribery Under Venezuelan bribery laws, according to articles 2 and 85, foreign companies can be prosecuted for foreign bribery, provided that they have of a foreign official? permanent residence in Venezuela or companies domiciled in national Article 2 of the Law against Corruption establishes who is liable. In this territory. regard, as it is stated in such article, either individuals or companies can According to the Law against Organised Crime and Terrorism be held liable for bribery of a foreign official, under the terms of article 85. Financing, corporations may be found criminally liable if they engage In April 2012, the Law against Organised Crime and Terrorism in corrupt practices that are deemed to be actions of organised crime. Financing came into force, which provides civil, administrative and crimi- Companies could be responsible even if the bribery was carried out by a nal liability for individuals and corporations that engage in corrupt practices company representative acting on the company’s behalf, thus exposing the under local law that also qualify as actions of organised crime. This law also company to special penalties. This law states that crimes of corruption are establishes liability if the crime is committed by just one person on behalf not subject to any statute of limitations. of a corporation. It is worth noting that this law applies to Venezuelans or Also, they may be prosecuted if they have engaged in other illicit con- foreigners who commit any of the offences established therein, even if they duct, which is defined as such by specific Venezuelan laws. were committed in foreign territory, when their behaviour affects financial interests or the security of Venezuela. In addition, the statute applies if part 15 Sanctions of the crime was committed in the country, at sea, in international waters What are the sanctions for individuals and companies violating or even in international airspace. the foreign bribery rules? 9 Civil and criminal enforcement The sanction established by article 85 is imprisonment from six to 12 years. Is there civil and criminal enforcement of your country’s 16 Recent decisions and investigations foreign bribery laws? Identify and summarise recent landmark decisions or Yes, there is. According to article 90 of The Law against Corruption, the investigations involving foreign bribery. Criminal Court Judge, in addition to the criminal sanction, has to deter- mine the civil liability of the people involved in the trial. There have been no recent decisions or investigations regarding foreign bribery, due to the fact that the law is very recent. 10 Agency enforcement One of the latest cases was, for instance, the one where a Venezuelan What government agencies enforce the foreign bribery laws ex-banking official pleaded guilty in a US bribery case on 18 November 2013. Maria de los Angeles González, who was a senior official in Venezuela’s and regulations? State Economic Development Bank (BANDES), pleaded guilty in the fed- There is no entity specifically in charge of investigating cases of foreign eral court in New York to charges that included money-laundering, as part bribery. Although the law created a new Intelligence Bureau in charge of of a deal to cooperate with US prosecutors in the ongoing probe of Direct prevention, investigation and fighting corruption, the law does not estab- Access Partners LLC. The investigation is for US$5 million paid in kick- lish determined attributions for this entity. backs, and money-laundering of more than US$60 million. The Public Prosecutor’s Office is the one in charge of criminal inves- tigations including corruption and has the power to designate the special- Financial record keeping ised authority to carry out the investigation. 17 Laws and regulations International cooperation must follow the regular international coop- eration mechanisms provided in treaties involving the respective courts, What legal rules require accurate corporate books and records, foreign ministries and public prosecutors’ offices. effective internal company controls, periodic financial statements or external auditing? 11 Leniency Venezuelan anti-bribery laws do not address corporate record and Is there a mechanism for companies to disclose violations in book-keeping. exchange for lesser penalties? According to the Law against Organised Crime and Terrorism Yes. A mechanism for companies to disclose violations in exchange for Financing, the obligors must retain, for a minimum period of five years, lesser penalties does exist under Venezuelan law. In accordance with these documents or records demonstrating the performance of operations and regulations, the penalty can be reduced for up to two-thirds if certain con- business relationships with the customers or users in hard copy and digi- ditions are met. tal format, as well as the documents required for their identification at the time of conducting business with the obligors. 12 Dispute resolution General commercial law requires accurate corporate book-keeping, and breaches of those obligations can result in classifying bankruptcy as Can enforcement matters be resolved through plea culpable or even fraudulent, and expose the management involved to agreements, settlement agreements, prosecutorial discretion criminal liability. or similar means without a trial? Accurate record keeping and the issue of correct financial statements is required under capital markets regulations, which apply to corporations Enforcement matters cannot be resolved through plea or settlement agree- that make public offers of securities (ie, bonds and stock). ments. They can only be resolved through trial since these matters are con- Additional obligations are imposed on financial and capital markets sidered a ‘non-disposable’ judicial matter by our legislation and doctrine. institutions by our anti-money-laundering legislation and regulations. That is, matters related to corruption are not subject to negotiation between Under tax legislation, inaccurate record and book-keeping can subject the parties and must be judged and punished according to the standards of the company and its management to administrative penalties. the applicable law. In general, external auditing is optional. 13 Patterns in enforcement 18 Disclosure of violations or irregularities Describe any recent shifts in the patterns of enforcement of the To what extent must companies disclose violations of anti- foreign bribery rules. bribery laws or associated accounting irregularities? Since the Law against Corruption is very recent, there have not been any Neither companies nor individuals are subject to specific obligations to dis- recent shifts in the patterns of enforcement. close violations of anti-bribery laws or associated accounting irregularities. www.gettingthedealthrough.com 247 VENEZUELA Hoet Peláez Castillo & Duque
Nonetheless, in the context of criminal law, a confession may give rise The same penalty, in each case, shall be applied to the intermediary to a reduction of the penalty. through which the public official received or had money or another profit promised, and to the person that gives or promises such money or profit. 19 Prosecution under financial record keeping legislation Are such laws used to prosecute domestic or foreign bribery? Article 63 Article 63 provides that those that attempt, without achieving their pur- There are no financial record keeping regulations that are used to pros- pose, to persuade or induce a public official to commit any of the crimes ecute domestic or foreign bribery; rather, financial records may be used provided for in articles 61 and 62 of this law will be guilty of unsuccess- as proof or evidence of illicit conduct taking place under anti-corruption ful (frustrated) bribery and shall be punished with imprisonment ranging regulations. from six months to two years. If the purpose is to make the official commit a crime specified in article 62, the penalties provided therein will be reduced 20 Sanctions for accounting violations by half. What are the sanctions for violations of the accounting rules associated with the payment of bribes? 23 Prohibitions Does the law prohibit both the paying and receiving of a bribe? This specific conduct is not addressed in Venezuelan anti-corruption regulations. Punishable conduct is the promise or payment of a bribe – Yes, the law prohibits both the paying and the receiving of a bribe. violations of accounting rules are not subject to specific penalties under Regarding bribe payment, Venezuelan law prohibits bribing or promising anti-bribery legislation. a bribe to any public official; the unsuccessful attempt to bribe a public official is also punished. 21 Tax-deductibility of domestic or foreign bribes The law also prohibits and punishes a public official who accepts the Do your country’s tax laws prohibit the deductibility of promise, the fee or another benefit that was not owed or that he should not receive. domestic or foreign bribes? Following the United Nations Convention against Corruption and the 24 Public officials guidelines in article 12, Venezuela prohibits the tax deduction of domestic How does your law define a public official and does that and foreign bribes, since local and foreign bribery is considered a crime, definition include employees of state-owned or state- and our national tax law only permits the deduction of legal expenses, it is controlled companies? nonetheless illegal under the Inter American Convention; also, Venezuelan income tax law provides that, in order to be deductible, expenses must be The law defines public officials as those who are in charge of exercising necessary for the normal progress of business, and a foreign bribe – which public, permanent or transitory, remunerated or non-remunerated func- is illegal – cannot be justified as a necessary expense in the normal course tions originated by election, by appointment or contract granted by a of business. public authority, at the service of the Republic, the states, the territories and federal dependencies, the districts, the metropolitan districts or the Domestic bribery municipalities, the autonomous national institutes, the public universities, the Central Bank of Venezuela or in any of the bodies or entities that exer- 22 Legal framework cise public power. Describe the individual elements of the law prohibiting bribery The definition of public officials also includes the directors and man- of a domestic public official. agers of civil and mercantile corporations, foundations, civil associations and other institutions constituted with public funds, or when the totality of The Law against Corruption penalises bribery of local public officials in the budgetary contributions or contributions in any fiscal year from one or articles 61, 62 and 63 in the following terms. several of the public persons represents 50 per cent or more of its budget or equity. Article 61 Article 61 provides that the public official who receives a benefit or other 25 Public official participation in commercial activities undue profit or accepts the promise of such a benefit or profit in exchange for any action in the performance of his or her duties has committed the Can a public official participate in commercial activities while crime of bribery. Bribery under this article, involving actions taken by pub- serving as a public official? lic officials, is punishable by imprisonment from one to four years and a In Venezuela, a public official can participate in any type of commercial fine of up to 50 per cent of the value of what was received or promised in activity while serving as a public official, provided that the public -offi the bribery scheme. Both public officials and parties who give or promise cial participates in such commercial activities with his own funds and the benefit or other profits are subject to these penalties. resources, and as long as there is no connection between those activities and his public duties. Article 62 Domestic law mandates public officials to give periodical sworn state- Article 62 provides that a public official who receives or is promised a sum ments about their assets or equity. of money or any other undue profit in exchange for delaying or omitting an action of his or her duties or for performing an action contrary to his or 26 Travel and entertainment her duties is guilty of bribery. Parties who offer the bribe are also subject to prosecution under this provision. Bribery under this article, involving Describe any restrictions on providing domestic officials delays or omissions of public officials or actions contrary to their duties, with gifts, travel expenses, meals or entertainment. Do the is punishable by imprisonment from three to seven years and a fine of up restrictions apply to both the providing and receiving of such to 50 per cent of the value of what was received or promised in the bribery benefits? scheme. Both public officials and parties who give or promise the benefit or other profits are subject to these penalties. The law uses the phrase ‘undue donation’. Nevertheless, the doctrine Prison terms shall be from four to eight years and the penalty shall be establishes that only monetary fees or benefits qualify to constitute corrup- of up to 60 per cent if the crime results in: tion. The gifts, travel expenses, meals or entertainment may be accepted, • the grant of public employment, subsidies, pensions or honours, or an but it will be up to the decision of the judge whether the import of the gift agreement on contracts related to the public administration to which impacts on the particular bribery case. the official belongs; or The taking of gifts, acceptance of coverage of travel expenses, meals or • favouring or harming any of the parties in an administrative or judi- entertainment by a public official are deemed to be violations of the code of cial procedure, whether civil or criminal or of any other nature. If the ethics of the public official and of the mandate to act honestly, subjecting responsible party is a judge and the result is a court decision that con- the official to disciplinary penalties that can lead to termination. demns the guilty party to imprisonment that exceeds six months, the penalty shall be imprisonment ranging from five to 10 years.
248 Getting the Deal Through – Anti-Corruption Regulation 2015 Hoet Peláez Castillo & Duque VENEZUELA
punished with the same sanction given to the public official who accepted Update and trends the promise or received money. The punishment is imprisonment ranging from one to four years and a fine of up to 50 per cent of the received or On 19 November 2014, the new Law against Corruption came into promised amount. force, approved by President Nicolas Maduro through Fast Track When the bribe is for delaying or omitting some action within the Authority granted by the National Assembly. functions of the public official, the sanction is imprisonment from three to seven years and a fine of up to 50 per cent of the received or promised benefit. 27 Gifts and gratuities When the bribe is used to award public employment, subsidies, pen- Are certain types of gifts and gratuities permissible under your sions or honours, to agree about contracts related to the public adminis- domestic bribery laws and, if so, what types? tration, or to favour or to cause some prejudice within an administrative procedure, a penal or civil judgment or a public procedure of any other The domestic bribery law prohibits giving a public official any ‘undue nature, the sanction is imprisonment from four to eight years and a fine of donation’ as a bribe. Currently, the national doctrine and judicial decisions up to 60 per cent of the received or promised benefit. consider as ‘undue donation’ only monetary fees, permitting gifts and gra- If the company or individual bribes a judge to issue a condemnatory tuities; nonetheless, it is up to the judge to decide if the gift was an undue judgment that restricts someone’s freedom exceeding six months, the donation or not, because there are no specifications in the law. sanction of imprisonment will be from five to 10 years. Again, as with travel and entertainment above, acceptance of gifts and gratuities is a breach of code of ethics and may expose the official to 30 Facilitating payments disciplinary penalties and eventual termination. Have the domestic bribery laws been enforced with respect to facilitating or ‘grease’ payments? 28 Private commercial bribery Does your country also prohibit private commercial bribery? There is no specific provision regarding ‘grease’ payments; thus, the general anti-bribery provisions described in question 22 apply. Yes. Article 47 of the Law against Corruption punishes people or entities, who directly or through a third party, offer gifts, profit or promises to any 31 Recent decisions and investigations representative of a private entity in exchange for an advantage or a benefit ahead of other person or entity in the sale or acquisition of goods. Identify and summarise recent landmark decisions and In addition, article 17 of the Law for the Protection and Promotion of investigations involving domestic bribery laws, including any Free Competition prohibits commercial bribery and violation of industrial investigations or decisions involving foreign companies. secrets as specific forms of disloyal competition. Breach of this prohibi- On 15 October 2013 the ninth crime control court of the State of Carabobo tion is considered by law to be an administrative violation and exposes (north-west Venezuela) remanded in custody Valencia’s Mayor Edgardo the offender to a fine of up to 10 per cent of the value of the sales of the Parra Oquendo, a member of the ruling United Socialist Party of offender, an amount that may be increased up to 20 per cent of the value of Venezuela, for alleged involvement in corruption during his tenure. The the sales. In the event of recidivism, the fine shall increase to 40 per cent. Venezuelan Public Prosecutor’s Office charged Mr Parra with collusive bid- The value of sales shall be that of the fiscal year immediately preceding the ding, corruption, embezzlement and criminal association. The court set imposition of the fine. the Bolivarian Intelligence Service Territorial Base in the city of Valencia, State of Carabobo (north-west Venezuela), as the detention centre. It also 29 Penalties and enforcement ordered seizure of Mr Parra’s bank accounts and assets, including estates, What are the sanctions for individuals and companies violating apartments, boats and technology equipment. the domestic bribery rules? The individuals and companies that violate bribery laws by giving or promising money to a public official for performing his functions will be
Carlos Domínguez-Hernández [email protected] Fernando Peláez-Pier [email protected]
Edificio Atrium, 3rd floor Tel: +58 212 201 8611 Avenida Venezuela, El Rosal Fax: +58 212 263 7744 Caracas 1060 www.hpcd.com Venezuela
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Vietnam
Ngo Viet Hoa Russin & Vecchi
1 International anti-corruption conventions 6 Facilitating payments To which international anti-corruption conventions is your Do the laws and regulations permit facilitating or ‘grease’ country a signatory? payments? Vietnam became a signatory to the United Nations Convention against Not applicable. Corruption on 30 June 2009. This convention came into effect on 18 September 2009. Vietnam has made reservations in connection with the 7 Payments through intermediaries or third parties following articles of the convention: In what circumstances do the laws prohibit payments through • article 20 on illicit enrichment; intermediaries or third parties to foreign public officials? • article 26 on prosecution of legal persons; and • article 66.2 on disputes concerning the interpretation or application of Not applicable. the convention. 8 Individual and corporate liability This is partly because Vietnamese law does not regulate matters covered Can both individuals and companies be held liable for bribery by articles 20 and 26 of the convention. In addition to the reservations, of a foreign official? Vietnam does not consider the convention to be a legal basis for extradi- tion (article 44). Extradition will be carried out on the basis of bilateral or Not applicable. multilateral agreements and on a reciprocal basis. 9 Civil and criminal enforcement 2 Foreign and domestic bribery laws Is there civil and criminal enforcement of your country’s Identify and describe your national laws and regulations foreign bribery laws? prohibiting bribery of foreign public officials (foreign bribery Not applicable. laws) and domestic public officials (domestic bribery laws). Vietnam has no national laws or regulations that prohibit bribery of foreign 10 Agency enforcement public officials (foreign bribery laws). The government is drafting a plan to What government agencies enforce the foreign bribery laws implement the United Nations Convention against Corruption, which may and regulations? result in supplements to the Criminal Code and Anti-Corruption Law to make bribery of foreign public officials and officials of international organi- Not applicable. sations a criminal offence pursuant to article 16.1 of the convention. The Criminal Code and the Anti-Corruption Law are the two main 11 Leniency legal instruments that govern bribery of domestic public officials (domes- Is there a mechanism for companies to disclose violations in tic bribery laws). exchange for lesser penalties? Foreign bribery Not applicable. 3 Legal framework 12 Dispute resolution Describe the elements of the law prohibiting bribery of a Can enforcement matters be resolved through plea foreign public official. agreements, settlement agreements, prosecutorial discretion Not applicable. or similar means without a trial?
4 Definition of a foreign public official Not applicable.
How does your law define a foreign public official? 13 Patterns in enforcement Not applicable. Describe any recent shifts in the patterns of enforcement of the foreign bribery rules. 5 Travel and entertainment restrictions Not applicable. To what extent do your anti-bribery laws restrict providing foreign officials with gifts, travel expenses, meals or 14 Prosecution of foreign companies entertainment? In what circumstances can foreign companies be prosecuted Not applicable. for foreign bribery? Not applicable.
250 Getting the Deal Through – Anti-Corruption Regulation 2015 Russin & Vecchi VIETNAM
15 Sanctions accounting book prior to filing the annual financial report with the com- What are the sanctions for individuals and companies violating petent state body, the error in the accounting book must be corrected in that year. If an error is discovered in an accounting book after the annual the foreign bribery rules? financial report has been filed, the error must be corrected in the account- Not applicable. ing book of the year in which the error is discovered and a note must be made on the last line of the accounting book for the year in which the error 16 Recent decisions and investigations was made. The Law on Securities generally requires issuing organisations, listing Identify and summarise recent landmark decisions or organisations, public companies, securities companies, fund management investigations involving foreign bribery. companies, and securities investment companies to disclose information Not applicable. completely, accurately, and promptly. This law provides certain circum- stances that specifically require disclosure. For example, a securities com- Financial record keeping pany or a fund management company must report to the stock exchange or a securities trading centre within 24 hours if legal proceedings are filed 17 Laws and regulations against a member of the board of management or the members’ council, What legal rules require accurate corporate books and records, the director or general director, the deputy director or deputy general effective internal company controls, periodic financial director, or the chief accountant of the company. In addition, a public com- statements or external auditing? pany or an issuing entity must make an extraordinary disclosure of infor- mation within 72 hours if it decides to change the accounting method it Law on Enterprises uses to maintain its records. The State Securities Commission of Vietnam The Law on Enterprises requires companies to organise their accounting may further request a public company to disclose any information which it system and to establish and submit true and correct financial reports in a finds detrimental to investors’ benefits. timely manner. The Law on Enterprises also requires companies to keep certain statistics and to report on corporate financial matters to the com- 19 Prosecution under financial record keeping legislation petent state bodies. Are such laws used to prosecute domestic or foreign bribery?
Law on Accounting As previously mentioned, Vietnam does not have national laws and regula- The Law on Accounting applies to state bodies and organisations, and to tions on foreign bribery. companies in all economic sectors, including state-owned, private and The Criminal Code is the basis for the prosecution of domestic brib- foreign invested companies, cooperatives, households conducting busi- ery. Criminal prosecution may occur for giving or receiving a bribe, and for ness activities, and companies and professionals providing accounting the brokerage of bribes. services. It provides rules on recording and filing accounting statistics, Although the Anti-Corruption Law does not contain provisions on preparing financial reports, and also describes criteria for accounting the prosecution of domestic bribery, it does provide that individuals who activities, including professional qualifications for accountants. The Law commit a corrupt act, such as bribery, are subject to the law irrespective of on Accounting prohibits providing or forcing a person to provide inaccurate their office or position and irrespective of whether they are retired, have accounting documents, hiding assets that must be included in accounting resigned or have been transferred to another job. records, or illegally disposing of accounting documents. Under the Law on Accounting, annual financial statements must be audited by a competent 20 Sanctions for accounting violations auditor, and must be annually filed with tax agencies; statistical offices; What are the sanctions for violations of the accounting rules and business registration offices. associated with the payment of bribes?
Law on Credit Institutions The Law on Accounting does not contain sanctions for a violation of The Law on Credit Institutions requires a credit institution to engage an the accounting rules that involves the payment of a bribe. The Law on independent auditing organisation to audit its operations prior to the end Accounting provides generally that an organisation or individual who of the fiscal year. The credit institution must provide accurate, complete breaches the laws on accounting must, depending on the nature and sever- and prompt information at the request of auditors. ity of the breach, be disciplined, whether by administrative penalty or crimi- nal prosecution. If loss and damage occur, compensation must be paid. Law on Securities Implementing regulations of the Law on Accounting impose the The Law on Securities requires an issuing entity to provide accurate, truth- following monetary penalties on breaches of accounting regulations: ful, and objective information about its offer or listing of securities. The • breach of regulations on accounting vouchers are subject to a mon- Law on Securities prohibits the disclosure of false information with the etary penalty of 500,000 to 30 million Vietnamese dong; intent to persuade or induce the purchase or sale of securities, or disclosure • breach of regulations on accounting books are subject to a monetary of incomplete or out-of-date information about an event that would have a penalty of 500,000 to 30 million Vietnamese dong; significant impact on the price of securities on the market. Under the Law • breach of regulations on maintenance of accounts are subject to a on Securities, a public company is also required to disclose its quarterly monetary penalty of 5 million to 20 million Vietnamese dong; and semi-annual financial statements which are reviewed by independent • breach of regulations on financial reports are subject to a monetary audit companies, and audited annual financial statements. penalty of 5 million to 30 million Vietnamese dong; • breach of regulations on accounting inspections are subject to a mon- 18 Disclosure of violations or irregularities etary penalty of 5 million to 15 million Vietnamese dong; • breach of regulations on preserving and archiving accounting docu- To what extent must companies disclose violations of anti- ments are subject to a monetary penalty of 500,000 to 20 million bribery laws or associated accounting irregularities? Vietnamese dong; Although the Criminal Code requires that crimes, including acts of corrup- • breach of regulations on inventory of assets are subject to a monetary tion, be reported (or ‘denounced’), this obligation only applies to individu- penalty of 500,000 to 10 million Vietnamese dong; als, not companies. Under the Anti-Corruption Law, both individuals and • breach of regulations on organising the accounting apparatus and companies are required proactively to prevent, discover, and report an act appointing accounting personnel are subject to a monetary penalty of of corruption, including bribery. Unlike the Criminal Code, which penal- 5 million to 20 million Vietnamese dong; ises individuals who fail to denounce corrupt acts, the Anti-Corruption • breach of regulations on accountancy practice are subject to a mon- Law does not penalise either companies or individuals that fail to fulfil the etary penalty of 20 million to 30 million Vietnamese dong; legal reporting requirements. • breach of regulations on applying accounting standards and the The Law on Accounting requires an accounting entity to provide truth- accounting regime are subject to a monetary penalty of 5 million to 30 ful and transparent accounting information and data to competent organi- million Vietnamese dong; and sations and individuals in a timely manner. If an error is discovered in an www.gettingthedealthrough.com 251 VIETNAM Russin & Vecchi
• breach of regulations on training and granting chief accountant Criminal Code have a broader scope of application than these definitions, certificate are subject to a monetary penalty of 500,000 to 20 million and include persons who work in a public capacity and have powers or Vietnamese dong. However, if a person gives or receives a bribe, or position (or both) including public officials, civil servants, and managers of engages in bribe brokerage, he or she is subject to criminal prosecution companies that are partly or wholly owned by the state. in accordance with the Criminal Code. He or she may be penalised as discussed in question 29. Law on Public Officials and Civil Servants Public officials are Vietnamese citizens who have been elected, approved 21 Tax-deductibility of domestic or foreign bribes or appointed to hold a position for a certain period of time with a body of Do your country’s tax laws prohibit the deductibility of the Vietnamese Communist Party, the state, or a social or political organi- domestic or foreign bribes? sation at the district level and above, and who are on the payroll of the state budget. ‘Public officials’ also include: public officials at the commune level Although there is no specific law on the deductibility of domestic or foreign who are Vietnamese citizens and have been elected to hold, for a certain bribes, companies must set out the true nature of their expenses in their period of time, a position with the Steering Committee of the People’s tax filings and provide receipts. Given that the Criminal Code prohibits Council, the People’s Committee, or as the chief secretary or deputy chief bribery, however, the tax authorities will not allow deduction of domestic secretary of the Communist Party’s Commission; the managers of social bribes. and political organisations; and civil servants at the commune level who are Vietnamese citizens and hold a specialised and professional position Domestic bribery under the People’s Committee at the commune level and who are on the payroll of the state. 22 Legal framework Civil servants are Vietnamese citizens who are on the payroll of the Describe the individual elements of the law prohibiting bribery state or are paid from the salary fund of a public service establishment and of a domestic public official. who have been recruited or appointed to hold a position with: • a body of the Vietnamese Communist Party, the state, or a social or Receiving bribes political organisation at district level and upwards; Under article 279 of the Criminal Code, a criminal charge of receiving bribes • a body or unit of the army, but not officers, professional soldiers, or can be established against a person if the following elements are proved: defence workers; • the person who receives the bribe must have powers or a position of • a body or unit of the police, but not professional officers or non-com- certain responsibility, and he or she must have taken advantage of his missioned officers; and or her position or powers (or both); • the leading or managing apparatus of a public service establishment • he or she, directly or through a middle man, has received or accepted of the Vietnamese Communist Party, the state, or a social and political money, property or a material interest that has a monetary value of organisation. 2 million Vietnamese dong or more; and • he or she has performed or not performed an act in the interest of or in Anti-Corruption Law accordance with the request of a person who gives a bribe to him or her. Under the Anti-Corruption Law, a corrupt act can be committed not only by public officials and civil servants, but also by: Although the Criminal Code does not clarify the matter, the person with • heads and managers of state-owned enterprises, and heads and man- powers or a position of responsibility must serve in a government body or agers who represent the state-owned share of capital contribution in public entity or organisation, as discussed in question 24. The Criminal an enterprise; or Code does not address bribery in the private sector. • persons who are assigned tasks or official duties and have powers In some circumstances, a person may be subject to a criminal charge during the performance of such tasks or official duties. of bribery even if the monetary value of the property or material inter- est is below 2 million Vietnamese dong, provided the two other elements The coverage of the Anti-Corruption Law seems to fit with the more gen- are proved. For example, if a person has been disciplined for bribery but eral application of the Criminal Code’s provisions on bribery. For example, continues to accept bribes, he or she may be subject to criminal charges article 279 of the Criminal Code on Receiving Bribes applies generally to a even if the bribe involved is less than 2 million Vietnamese dong. person with power or position (or both) who performs or does not perform an act in exchange for material gain. Giving bribes Under article 289 of the Criminal Code, a criminal charge of giving bribes 25 Public official participation in commercial activities may be established against a person if he or she gives a bribe with a mon- etary value of 2 million Vietnamese dong or more. Although the Criminal Can a public official participate in commercial activities while Code does not provide other elements, it is clear that article 289 must be serving as a public official? reviewed together with article 279 – that is, the bribe must have been given A public official is restricted by the Anti-Corruption Law from participating to a person with powers or position (or both) in a government body or pub- in commercial activities. Unless assigned to work for companies that are lic entity or organisation, as discussed in question 24. partly or wholly owned by the state, a public official may not: • establish or participate in the establishment, management or admin- 23 Prohibitions istration of private enterprises, limited liability companies, sharehold- Does the law prohibit both the paying and receiving of a bribe? ing companies, partnerships, cooperatives, private hospitals, private schools or private scientific research establishments; or The Criminal Code and Anti-Corruption Law prohibit both the paying and • act as a consultant for other entities or individuals in affairs connected receiving of bribes. However, a person who is found guilty of receiving a with state secrets or secrets of his or her work, or affairs that fall under bribe may be subject to a more severe sentence or to additional punish- his or her power to resolve or in which he or she is involved. ment than a person convicted of paying a bribe. For example, a person who receives a bribe may, in addition to imprisonment, be prohibited from Furthermore, heads and deputy heads of bodies must not allow their holding certain positions of employment for a period of between one and spouse, parent or child to conduct business within the scope of affairs five years, or some or all of his or her assets may be confiscated. under their direct management. In addition, a public official who used to work for certain ministries 24 Public officials or government branches, such as the Ministry of Industry and Trade or How does your law define a public official and does that the Ministry of Planning and Investment, is prohibited from conducting definition include employees of state-owned or business in the sector in which he or she was previously responsible for state-controlled companies? management for a period of time ranging from six months to 24 months after resignation from his or her position. The Law on Public Officials and Civil Servants defines the terms ‘public official’ and ‘civil servant’. However, the Anti-Corruption Law and the
252 Getting the Deal Through – Anti-Corruption Regulation 2015 Russin & Vecchi VIETNAM
26 Travel and entertainment 30 Facilitating payments Describe any restrictions on providing domestic officials Have the domestic bribery laws been enforced with respect to with gifts, travel expenses, meals or entertainment. Do the facilitating or ‘grease’ payments? restrictions apply to both the providing and receiving of Facilitating or ‘grease’ payments are not treated differently from other such benefits? bribes under the Anti-Corruption Law. If ‘grease’ payments are found to The provision of gifts to a public official is strictly governed by the Anti- be related to corrupt acts, including bribery, the perpetrator will be pros- Corruption Law and by the Regulations on Giving, Receiving and Returning ecuted for bribery in accordance with the Criminal Code. Gifts Applicable to Bodies, Organisations and Units Funded by the State Budget and Public Officials and Civil Servants, issued under Decision No. 31 Recent decisions and investigations 64/2007/QD-TTg (10 May 2007) of the Prime Minister (Decision 64). Identify and summarise recent landmark decisions and Gifts are defined broadly to include money, property or other material investigations involving domestic bribery laws, including any interests. Accordingly, a public official is not permitted to: investigations or decisions involving foreign companies. • receive gifts from a body, organisation, unit or individual who is involved in affairs that the public official has the authority to resolve, Deputy Minister of Trade sentenced to 14 years’ imprisonment or that fall under his or her management; for receiving bribes • receive gifts from a body, organisation, unit or individual who presents On 23 March 2007, the People’s Court of Ho Chi Minh City rendered a judg- gifts without any reason; or ment in a criminal case for the illegal sale and purchase of garment quo- • receive gifts as part of a corrupt act, such as bribes for which the public tas. The criminal charges consisted of receiving and giving bribes, bribe official may be subject to criminal charges under the Criminal Code. brokerage, and other acts of corruption. The case involved Mai Van Dau (Deputy Minister of Trade), Le Van Thang (deputy director of the import 27 Gifts and gratuities and export department), several officials of the Ministry of Trade, and a Are certain types of gifts and gratuities permissible under your number of directors and deputy directors of domestic and foreign-invested domestic bribery laws and, if so, what types? trading and garment companies. The Deputy Minister of Trade was sentenced to 14 years’ imprisonment for receiving bribes of US$6,000 to According to Decision 64, a public official is allowed to receive gifts from grant garment quotas to certain domestic and foreign-invested garment a body, organisation, unit or individual who is not involved in affairs which companies. The deputy director of the import and export department was he or she has the authority to resolve, or that fall under his or her manage- sentenced to 17 years’ imprisonment for receiving bribes of US$18,000 ment. In practice, this provision may be interpreted as a prohibition, given to propose the illegal issuance of quotas to certain domestic and foreign- the broad restrictions on the receipt of gifts as discussed in question 26. In invested garment companies. Other persons who were found guilty of addition, a public official may receive gifts with a monetary value of less giving bribes and bribe brokerage were sentenced to between five and 12 than 500,000 Vietnamese dong on certain occasions such as public holi- years’ imprisonment. days, provided that the gifts do not fall within the prohibited circumstances as discussed in question 26. General director of Project Management Unit 18 under the Ministry of Communications and Transportation sentenced to six 28 Private commercial bribery years’ imprisonment for giving bribes Does your country also prohibit private commercial bribery? This criminal case attracted the attention of many international donors and foreign governments because Project Management Unit (PMU) 18 Vietnamese law does not regulate private commercial bribery (ie, giving manages a large amount of official development assistance (ODA) funds bribes to or receiving bribes from any person who directs or works, in any to finance infrastructure development projects in Vietnam. According to capacity, for a private sector entity in return for his or her breach of duties). the judgment, issued on 7 August 2007 by the People’s Court of Hanoi, Criminal bribery is always associated with a person who has a position or Bui Tien Dung, general director of PMU 18, was sentenced to six years’ powers with a government body or a government or public entity or organi- imprisonment for giving bribes of 1.1 billion Vietnamese dong. Bui Tien sation as discussed in question 24. Dung was also prosecuted for several other criminal offences, includ- ing illegal gambling of US$1 million. The case also involved Nguyen Viet 29 Penalties and enforcement Tien, Deputy Minister of Communications and Transportation. Although What are the sanctions for individuals and companies violating Nguyen Viet Tien avoided criminal sanctions, he was dismissed by the the domestic bribery rules? Prime Minister on 29 August 2008 for his negligence, which had caused serious consequences. Sanctions for violating the domestic bribery rules are imposed on specific individuals but not on companies. Under the Criminal Code, sanctions for Director of the Project Management Unit of the East–West individuals include: • the death sentence; Highways Project sentenced to life imprisonment for corrupt acts On 25 September 2009, the People’s Court of Ho Chi Minh City handed • fixed-term imprisonment; and down a three-year sentence to Huynh Ngoc Si for taking advantage of his • life imprisonment. powers while carrying out public duties. Mr Si was director of the Project Management Unit of the East–West Highway Project, which was funded A person who is found guilty of bribery is subject to additional sanctions, by Japan Bank for International Cooperation and by the Japanese govern- which may include: ment. This criminal case derived from charges of unfair competition in a • prohibition from holding certain jobs for a period of one to five years; case initiated by Japanese prosecutors in Tokyo against four executives of • monetary fine equal to as much as five times the value of the bribe; or Pacific Consultants International (PCI), a Japanese consulting company. • confiscation of assets. According to the original charges, the executives of PCI gave bribes of US$820,000 to Mr Si between 2003 and 2006 in order to win the bid for Senior managers in state-owned corporations can be responsible for negli- supervising consultancy services for the East–West Highway Project. gence or mismanagement, even if they themselves did not commit a brib- While the Vietnamese Ministry of Public Security was consider- ery act. ing these charges, the Japanese ambassador to Vietnam announced on 4 Under Law No. 43/2013/QH13 of the National Assembly dated 26 December 2008 that the Japanese government had decided to suspend November 2013 on Tendering, if there is any bribery during the tendering all ODA funds granted to Vietnam, pending conclusion of the case. On 8 process, the result of a tendering may be cancelled, and the bidder may December 2008, the Vietnamese Ministry of Public Security’s Department be prohibited from participating in tendering activities in Vietnam upon a of Investigation of Corruption initiated its criminal case against Huynh decision of a competent authority; and be liable for any damages incurred Ngoc Si. Owing to the lack of evidence, however, Mr Si was initially found by the state and/or any third party, which is caused by such cancellation. guilty only of taking advantage of his powers while carrying out public duties, and initially was sentenced to three years’ imprisonment.
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On 18 October 2010, however, Huynh Ngoc Sy was sentenced to life Development Bank’s branch in Dak Nong province (VDB Dak Nong), to imprisonment for receiving bribes. The evidence was partially provided by death for receiving bribes, and to request indemnity of 10 billion dong the government of Japan. This was the first time in Vietnam’s judicial his- and confiscation of Hung’s real estate in Nha Trang, Dak Lak, Binh Duong tory that a Vietnamese authority has collected and used evidence provided Province, and Ho Chi Minh City. The court also imposed life imprisonment by a foreign authority in order to accuse and prosecute a Vietnamese public sentences on Cao Bach Mai, former director of Minh Nhat Trading and official of bribery. Services Limited Company, and Tran Thi Xuan, former director of Nhat Tan Trading and Services Limited Company, for giving bribes to Hung. Polymer banknote printing contract investigation According to the indictment, Hung approved counterfeit loans in the total In January 2011, an investigative report by Melbourne newspaper The Age amount of US$89 million. To approve those contracts, Hung was said to accused Securency International and Note Printing Australia – subsidiar- have received a car worth 3 billion dong from Mai and Xuan. Hung was also ies of the Reserve Bank of Australia (RBA) – of bribing foreign officials in alleged to receive a diamond ring and US$5.5 million in kickbacks. There Vietnam, Indonesia and Malaysia in return for banknote printing contracts. was not, however, sufficient evidence to prove such bribes. By July 2011, the Australian federal police had already charged and In September 2014, the Supreme People’s Court of Vietnam upheld arrested six former senior executives in relation to the banknote scandal. In the sentences handed down by the People’s Court of Dak Nong province. Britain, the former vice-president of Securency, Bill Lowther, was charged by Britain’s Serious Fraud Office in the same case. Several arrests were also Vietnam Railway Corporation made in Malaysia and Spain as the scandal escalated. On 21 March 2014, several Japanese newspapers reported that Tamio The former governor of the State Bank of Vietnam (SBV), Le Duc Kakinuma, former president of Japan Transportation Consultants, Inc Thuy, among other Vietnamese officials, was alleged to have received (JTC), admitted the Tokyo-based railway consultant firm had paid ¥160 bribes given by Securency International. million in kickbacks to officials involved in projects in Vietnam, Indonesia, Mr Thuy was the SBV’s governor from 1999 to 2007. In March 2008, and Uzbekistan between 2009 and 2014. The payment to secure a bidding Prime Minister Nguyen Tan Dung appointed Mr Thuy as the chairman package for a Japanese ODA-funded urban railway project in Hanoi was of the National Financial Supervisory Committee, an agency in charge of said to be about ¥66 million. As of December 2014, Vietnamese police supervising banking, securities and insurance activities. As the Australian have detained six officials of Vietnam Railways, including Tran Quoc Dong police revealed Mr Thuy’s involvement in the banknote scandal, the Prime – a deputy general director of Vietnam Railways – to investigate their role in Minister signed a decision on the retirement of Mr Thuy from public the bribery scandal. Tran Quoc Dong and five other officials were charged service from 1 May 2011. The Prime Minister then directed the Ministry with ‘abuse of a position and/or powers while performing official duties’, of Public Security to investigate the case and identify the responsibility of which carries a term of up to 15 years’ imprisonment. The case has not yet relevant government officials. been brought to trial. In October 2011 the Vietnamese National Assembly received a report The scandal prompted the Japanese government to suspend new offi- from the Ministry of Public Security that there was no evidence of bribery cial development assistance (ODA) funding to Vietnam in early June 2014. found in relation to the banknote scandal in Vietnam. However, the report Japan, however, resumed all aid in late July on the condition that Vietnam was preliminary and not yet conclusive, and until now there is no further commits to investigate all ODA projects involving JTC and Vietnam report or declaration issued by the Vietnamese government. Australian Railways and pledges specific measures to stop future graft. media also cited that the Vietnamese government refused to cooperate in its international investigation. Bio Rad Laboratories Inc (Bio-Rad) In August 2012, committal hearings against Securency commenced On 3 November 2014, the US Justice Department and the Securities and before the Magistrates Court of Victoria (Melbourne) revealed that Luong Exchange Commission (SEC) concluded that Bio-Rad, a global provider of Ngoc Anh, an intelligence officer colonel who had close relations with life science research and clinical diagnostic products, paid $7.5 million in top Vietnamese leaders, received a commission fee of A$15 million from bribes to officials in Vietnam, Thailand and Russia in return for medical Securency in order to win the polymer banknote contract for Securency. supply contracts in these countries. The bribes paid by Bio-Rad in Vietnam The court, however, concluded that there was insufficient evidence of any from 2005 to 2009 totalled $2.2 million. On 5 November, the Ministry of bribes in relation to the banknote deal. Health requested the Ministry of Public Affairs to launch an investigation In November 2012, Bill Lowther was also acquitted by Southwark on the bribery case. Crown Court in London of conspiring to give bribe to Mr Le Duc Thuy by By the end of 2014, there was no official conclusion by competent helping his son, Le Duc Minh, to enrol at Durham University and by paying authorities regarding this bribery case. £3,132 for accommodation and £18,000 in tuition fees in 2003.
Vietnam Development Bank On 13 March 2014, the People’s Court of Dak Nong province issued a judgment to sentence Vo Viet Hung, former director of Vietnam
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254 Getting the Deal Through – Anti-Corruption Regulation 2015 Transparency International APPENDIX: CORRUPTION PERCEPTIONS INDEX
Appendix Corruption Perceptions Index
Transparency International
The Corruption Perceptions Index (CPI), published annually by A country’s rank indicates its position relative to the other countries Transparency International, ranks countries and territories based on how and territories included in the index. This year’s CPI includes 175 countries corrupt their public sector is perceived to be. A country or territory’s score and territories. Full details on the methodology are available at www.trans- indicates the perceived level of public sector corruption on a scale of zero parency.org/cpi2014/results/. to 100, where zero means that a country is perceived as highly corrupt and 100 means it is perceived as very clean. © 2014 Transparency International. All rights reserved.
CPI 2014 CPI 2014 CPI 2014 Rank Country/territory score Rank Country/territory score Rank Country/territory score 1 Denmark 92 Saint Vincent and the 55 Lesotho 49 29 Grenadines 67 2 New Zealand 91 55 Namibia 49 30 Bhutan 65 3 Finland 89 55 Rwanda 49 31 Botswana 63 4 Sweden 87 55 Saudi Arabia 49 31 Cyprus 63 5 Norway 86 61 Croatia 48 31 Portugal 63 5 Switzerland 86 61 Ghana 48 31 Puerto Rico 63 7 Singapore 84 63 Cuba 46 35 Poland 61 8 Netherlands 83 64 Oman 45 35 Taiwan 61 9 Luxembourg 82 64 The FYR of Macedonia 45 37 Israel 60 10 Canada 81 64 Turkey 45 37 Spain 60 11 Australia 80 67 Kuwait 44 39 Dominica 58 12 Germany 79 67 South Africa 44 39 Lithuania 58 12 Iceland 79 69 Brazil 43 39 Slovenia 58 14 United Kingdom 78 69 Bulgaria 43 42 Cape Verde 57 15 Belgium 76 69 Greece 43 43 Korea (South) 55 15 Japan 76 69 Italy 43 43 Latvia 55 17 Barbados 74 69 Romania 43 43 Malta 55 17 Hong Kong 74 69 Senegal 43 43 Seychelles 55 17 Ireland 74 69 Swaziland 43 47 Costa Rica 54 17 United States 74 76 Montenegro 42 47 Hungary 54 21 Chile 73 76 Sao Tome and Principe 42 47 Mauritius 54 21 Uruguay 73 78 Serbia 41 50 Georgia 52 23 Austria 72 79 Tunisia 40 50 Malaysia 52 24 Bahamas 71 80 Benin 39 50 Samoa 52 25 United Arab Emirates 70 80 Bosnia and Herzegovina 39 53 Czech Republic 51 26 Estonia 69 80 El Salvador 39 54 Slovakia 50 26 France 69 80 Mongolia 39 55 Bahrain 49 26 Qatar 69 80 Morocco 39 55 Jordan 49 85 Burkina Faso 38
www.gettingthedealthrough.com 255 APPENDIX: CORRUPTION PERCEPTIONS INDEX Transparency International
CPI 2014 CPI 2014 CPI 2014 Rank Country/territory score Rank Country/territory score Rank Country/territory score 85 India 38 115 Mali 32 150 Central African Republic 24 85 Jamaica 38 119 Belarus 31 150 Paraguay 24 85 Peru 38 119 Mozambique 31 152 Congo Republic 23 85 Philippines 38 119 Sierra Leone 31 152 Tajikistan 23 85 Sri Lanka 38 119 Tanzania 31 154 Chad 22 85 Thailand 38 119 Vietnam 31 Democratic Republic of the 85 Trinidad and Tobago 38 124 Guyana 30 154 Congo 22 85 Zambia 38 124 Mauritania 30 156 Cambodia 21 94 Armenia 37 126 Azerbaijan 29 156 Myanmar 21 94 Colombia 37 126 Gambia 29 156 Zimbabwe 21 94 Egypt 37 126 Honduras 29 159 Burundi 20 94 Gabon 37 126 Kazakhstan 29 159 Syria 20 94 Liberia 37 126 Nepal 29 161 Angola 19 94 Panama 37 126 Pakistan 29 161 Guinea-Bissau 19 100 Algeria 36 126 Togo 29 161 Haiti 19 100 China 36 133 Madagascar 28 161 Venezuela 19 100 Suriname 36 133 Nicaragua 28 161 Yemen 19 103 Bolivia 35 133 Timor-Leste 28 166 Eritrea 18 103 Mexico 35 136 Cameroon 27 166 Libya 18 103 Moldova 35 136 Iran 27 166 Uzbekistan 18 103 Niger 35 136 Kyrgyzstan 27 169 Turkmenistan 17 107 Argentina 34 136 Lebanon 27 170 Iraq 16 107 Djibouti 34 136 Nigeria 27 171 South Sudan 15 107 Indonesia 34 136 Russia 27 172 Afghanistan 12 110 Albania 33 142 Comoros 26 173 Sudan 11 110 Ecuador 33 142 Uganda 26 174 Korea (North) 8 110 Ethiopia 33 142 Ukraine 26 174 Somalia 8 110 Kosovo 33 145 Bangladesh 25 110 Malawi 33 145 Guinea 25 115 Côte d´Ivoire 32 145 Kenya 25 115 Dominican Republic 32 145 Laos 25 115 Guatemala 32 145 Papua New Guinea 25
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