Africa in Context
Bribery and corruption are likely to be words that come to mind when people think of the risks of doing business in frontier markets, particularly African countries. Transparency International’s Corruption Perceptions Index 2010 is a useful benchmark for the measure of corruption. Africa does not do well. Somalia is 178th out of 178 countries (with a rating of 1.1) and only Tunisia, Ghana, Namibia, Botswana and South Africa score higher than 4 out of 10.
The Bribery Act
As a law firm that specialises in advising on projects, corporate and finance transactions in Africa, particularly in the power, natural resources and infrastructure sectors, the introduction of the Bribery Act 2010 (the Act) ( click here for Act) in the UK on 1 July is of real significance to the firm and its clients. This is primarily because the Act (depending on the particular offence and subject to certain requirements) has broad extra-territorial effect.
The extra-territorial application of the Act means that it is more likely for bribery outside the UK to attract the attention of the UK authorities, in particular, the Serious Fraud Office (SFO). It is also more likely that bribery outside the UK will attract the attention of authorities in multiple jurisdictions, and will result in the more frequent need for co-operation between authorities in conducting investigations and prosecutions.
Foreign Corrupt Practices Act
In respect of cases that also attract the attentions of the US Department of Justice, for example, with respect to alleged Foreign Corrupt Practices Act of 1977 violations, the Attorneys General of the US and the UK will take into account joint guidance that they have issued for handling criminal cases with concurrent jurisdiction. This sets out protocols in respect of information sharing and consultation among the prosecutors from an early stage. In practice, the US authorities, including the US Securities and Exchange Commission and UK authorities, regularly share information regarding anti-corruption investigations, including those stemming from voluntary disclosures, through formal and informal mechanisms.
OECD Convention on Combating Bribery
Organisations from the 34 OECD member countries and four non-member countries (Argentina, Brazil, Bulgaria, and South Africa) will also need to be aware of the OECD Anti-Bribery Convention (click here). It establishes legally binding standards to criminalise bribery of foreign public officials in international business transactions and provides for a host of related measures that make this effective. It is the first and only international anti-corruption instrument focused on the ‘supply side’ of the bribery transaction.
In addition to the well-documented legislation and convention referred to above, companies doing business in Africa will need to be cognisant of the existence and content of local legislation in the countries in Africa in which they are operating.
In this series of articles we focus on three jurisdictions in which the firm and its clients are currently very busy: Nigeria, Kenya and South Africa.
Africa Business Affairs
In addition to this article, Trinity has launched its Africa Business Affairs Guide that is designed to assist clients to build their businesses in Africa. The Guide will be updated to include details of the anti-bribery and anti-corruption legislation in each of the 15 countries the Guide currently covers. Additional jurisdictions will also be added over time.
Nigeria, Kenya and South Africa
In this series of articles, we consider the relevant anti-bribery legislation that applies in South Africa, Nigeria and Kenya. These Parts have been very kindly contributed by Bowman Gilfillan in South Africa,Adepetun, Caxton-Martins, Agbor & Segun in Nigeria and Walker Kontos Advocates in Kenya.
PART I: PRACTICAL CONSEQUENCES OF UK BRIBERY ACT
In summary, the Act creates the following offences:
· General offences of bribing another person (section 1 of the Act) and being bribed (section 2).
· Bribery of foreign public officials (section 6).
· Failure of commercial organisations to prevent bribery (section 7).
· Senior officer consent or connivance offence (section 14).
All Commercial Organisations
All commercial and public sector organisations should put in place adequate procedures to ensure that they are not involved in bribery and corruption and that they do not incur liability under the Act.
An anti-corruption policy is a suitable and effective tool. The nature of the policy will depend on the size of the company, the value of transactions and the sectors and jurisdictions in which the company operates.
In our view, those companies active in Africa should strongly consider putting in place an anti-corruption policy.
Organisations will need to consider reviewing the adequacy of their internal procedures to prevent bribery and put in place staff training as well as ensuring they have written procedures available to staff and contracted consultants. It is prudent to consider incorporating these into contracts of employment and service including a right for the employer to terminate employment or engagement in the case of breach.
Companies should also carry out due diligence before entering into arrangements with other parties as well as ensuring that appropriate checks are carried out during the processing of payments.
Mitigation strategies should be put in place so that organisations can deal with an allegation of bribery or corruption made within the company or in public. For a public allegation, for instance, a response through traditional print, visual or audio media alone may not effectively reduce potential damage to reputation, because the allegations may emerge and spread via small campaigning groups, NGOs, specialist blogs and other online activity.
Ministry of Justice Guidance
On 30 March 2011 the Ministry of Justice in the UK published its guidance (the "Guidance") about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing ( Click here for the Guidance).
The Guidance is centred upon six principles for bribery prevention. These principles should be considered when implementing procedures to prevent bribery and corruption.
(a) Proportionate Procedures
As noted above, a commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They should also be clear, practical, accessible, effectively implemented and enforced.
(b) Top Level Commitment
This emphasises that senior management have responsibility for ensuring that their commercial organisation has the correct procedures in place to prevent bribery and corruption. The board of directors should be seen to take responsibility for the company’s anti-corruption regime.
(c) Risk Assessment
It is essential for all organisations to make periodic, informed and documented assessments of the risks they face in terms of the markets in which they transact business and the counterparties in those transactions. Relevant factors to be taken into account include the jurisdictions where the company operates, the sectors in which it operates, the extent to which it deals with public officials or government contracts and the nature of the transactions.
Our clients that our entering into contracts with a government in an African jurisdiction within the extractive or energy industries will, clearly, need to be particularly vigilant. Equally, companies entering into construction contracts in these jurisdictions and sectors will need to be cautious.
(d) Due Diligence
All businesses are expected to perform due diligence on the individuals and entities who perform services on their behalf. It is essential that all commercial organisations know exactly who they are doing business with. The use of risk consulting companies to carry out integrity due diligence is an essential tool in high-risk African markets, for instance.
All new business partners should be made aware, in writing, of the company’s anti-corruption code of conduct before any dealings with them begin, and the organisation should ensure that business partners have strict anti-corruption policies and procedures in place. In addition, contracts with business partners should include express contractual obligations and penalties in relation to corruption.
In respect of a propose project to be developed, for example, due diligence should be carried out as to whether it is to be billed at market prices and what project-based anti-corruption measures are being implemented. For further information on project based anti-corruption systems, see the Global Infrastructure Anti-Corruption Centre’s note on project anti-corruption systems ( click here).
It is vital that businesses clearly communicate their policies on bribery and corruption both internally to employees and, where appropriate, externally to those performing services on their behalf.
(f) Monitoring and Review
Given the risks commercial organisations face can change over time, all procedures put in place to prevent bribery and corruption should be periodically reviewed.
An anti-corruption code of conduct should:
· Expressly prohibit all forms of corruption.
· Explain why it is necessary to prohibit corruption (setting out the moral case as well as the legal risks).
· Commit the organisation to conduct its business and affairs so as to ensure that it does not engage in or facilitate any form of corruption.
· Give guidance on what action should be taken when faced with blackmail or extortion, including a clear escalation process and outline expected standards of behaviour and emphasise individual accountability.
· Set out procedures for carrying out due diligence on outside advisors and third parties, and on acquisitions.
· Set out clear rules and policies including on matters such as giving and receiving political donations, gifts, hospitality and facilitation payments.
· Set out procedures for whistleblowing.
· Support anti-corruption action by others in the sector.
Once written, the anti-corruption code needs to be implemented effectively. It should be clear who is responsible for implementation and how internal reporting works. In larger organisations in particular, a compliance officer should be appointed and perhaps a help desk to provide advice.
Information on training should be made available to employees and connected persons.
Monitoring processes should be defined and penalties for breach of the policies and procedures made clear.
As noted above, a whistleblowing facility to allow staff and/or third parties to report suspected corruption is a prudent step. Any reports should be made in a safe and confidential manner to either the compliance manager or senior management who will have a clear line of communication to the compliance manager.
The monitoring and auditing of the anti-corruption policies and procedures on a regular basis is important. Organisations should also consider whether to appoint an independent third party to do this to ensure that they are appropriate and effectively implemented.
Responsibilities of the compliance officer might include reviewing the risks that face the organisation, developing and reviewing the anti-corruption code of conduct, devising, updating and providing training to all relevant employees, carrying out or overseeing due diligence of third parties, maintaining a conflicts register and supervising the whistleblowing procedures and negotiating (or ensuring that top level management is involved in negotiating) anti-corruption terms in the organisation’s contracts.
Political donations, gifts, hospitality and expenses
Gifts, such as cash, presents, political or charitable donations and hospitality, such as meals, hotels, invitations to arts and sporting events, can be used as bribes. They are currently considered bribes and will be bribes under the Act when they are given or received with the intention of influencing business decisions. Risk assessments should therefore cover the bribery risks associated with hospitality and promotional expenditure across all operations and business partners.
There has been criticism directed at the Guidance. The UK’s leading anti-corruption watchdog, Transparency International UK, is strongly critical of the Guidance. Chandrashekhar Krishnan, Executive Director of Transparency International UK maintains:
" The Bribery Act, as passed by the last Parliament, is one of the best anti-bribery laws in the world. But the Guidance will achieve exactly the opposite of what is claimed for it. Parts of it read more like a guide on how to evade the Act, than how to develop company procedures that will uphold it ".
Transparency International Principles
Transparency International has published a set of Business Principles for Countering Bribery that serve as a useful tool ( click here).
Transparency International has also published guidelines on avoiding corruption in the City and a training toolkit for companies ( click here).
Small and Medium-Sized Organisations
Transparency International publishes a small and medium-sized enterprises (SMEs) version of its business principles for countering bribery (SME business principles). SMEs will often have more limited resources with which to face the challenges of resisting and countering bribery and the growing requirements made by large international companies for their suppliers to have appropriate anti-bribery policies and systems in place.
 Transparency International, " Government Guidance ‘deplorable’ and will weaken Bribery Act" at: http://www.transparency.org.uk/all-news-releases/167-government-guidance-deplorable-and-will-weaken-bribery-act