New tools for tackling corruption and for navigating anti-corruption laws
Recent months have seen a number of key developments in the area of anti-bribery and corruption for our clients: the UK Chamber of Shipping published its Practical Guidance for the UK Shipping Industry, the UK’s first Deferred Prosecution Agreement was approved in relation to a breach of s.7 of the Bribery Act 2010 (“the Act”) and BIMCO introduced its new anti-corruption clause for charterparties. These events came amidst the widely-reported suspension of a senior executive in a shipping company for alleged corruption (albeit when he was previously working in the telecommunications sector).
UK Chamber of Shipping Guidance
The UK Chamber of Shipping has recently launched its specially-prepared Guidance on the application of the Act. The Guidance moves forward the difficult issue of reconciling the zero-tolerance approach to facilitation payments under the Act with the realities of the places where the shipping industry operates.
The Chamber of Shipping suggests a “Resist, Report and Record” approach. Its Guidance can be found in its publication “The Bribery Act 2010. Practical Guidance for the UK Shipping Industry”, available here.
The UK’s first Deferred Prosecution Agreement, involving the corporate bribery offence
On 30 November 2015, Lord Justice Leveson made history by giving the English Court’s seal of approval to the first Deferred Prosecution Agreement (“DPA”) since the concept was introduced by the Crime and Courts Act 2013. The purpose of a DPA is to provide a mechanism whereby an organisation can avoid prosecution for certain types of offences by entering into an agreement on negotiated terms.
With Standard Bank Plc (now ICBC Standard Bank) having discovered potential bribery by one of its subsidiaries of $600m in Tanzania, external counsel was instructed to investigate the suspicious activity. Following the investigation, a self-report was made to both the Serious Fraud Office and the Serious and Organised Crime Agency for a potential breach of s.7 of the Act, being the failure by a commercial organisation to prevent bribery. Under the terms of the DPA, Standard Bank was liable to pay compensation and a financial penalty of USD16.8millon and had to account for a disgorgement of profit of around USD8.4million.
This is important for two reasons. First, it is the first instance of a DPA (a concept new to English law and practice and derived, in a modified form, from an established practice in the United States). Second, it shows that s.7 of the Act, which requires companies to introduce “adequate procedures” to prevent corruption or face the risk of prosecution in relation to a corrupt activity (even, in some cases, where they have no knowledge of such activity taking place), has teeth. It is now just as important as ever that companies review their anti-corruption policies and procedures.
The BIMCO anti-corruption clause
Developments in worldwide anti-corruption legislation, including the Act, have led to a variety of anti-corruption clauses being introduced into charterparties and other contracts in recent years, many of them heavily weighted in favour of one of the parties. In its new clause, BIMCO aims to provide the shipping industry with a wording that balances owners’ and charterers’ responsibilities, and is itself compliant with the requirements of the Act.
The clause contains a mechanism for shipowners to issue a Letter of Protest to charterers in the event that a demand for payment, goods or another thing of value is made by a third party and, despite the parties taking reasonable steps to resist it, such a demand is not withdrawn. Ordinarily a Letter of Protest will be issued to local interests at the port in question. However, in each case the Master will need to consider the relevant circumstances in order to decide to whom the Letter of Protest should be directed, as it may not be appropriate to address it to local interests if it is suspected that to do so may further complicate matters.
Without evidence to the contrary, it will be deemed that any delay will be as the result of resisting the demand and the vessel will remain on-hire, or time lost will count as laytime/demurrage. If either party fails to comply with anti-corruption legislation, it is to reimburse the other for any fines, penalties or other losses incurred as a result of the breach. It also permits the innocent party to terminate the charter in circumstances where the applicable anti-corruption legislation has been breached by the other party, resulting in the innocent party attracting liability under the relevant anti-corruption laws.
Whilst a company may not fall within the provisions of the Act, it will often be an “associated person” of a contractual counterparty that is caught by the Act. For example, any insurer, broker or agent with a presence in the UK should be taking adequate steps to ensure its associated persons’ compliance with the Act so that, in the event that a bribe were to occur that benefited them, they could show they had in place adequate procedures. They will often therefore require their “associated persons” to meet the same anti-corruption standards as they do. These standards will, of course, be compliant with the Act. So the potential benefits of the anti-corruption clause to a shipowner or charterer are twofold: it will help to ensure that their“associated persons” are compliant; and it will also help to satisfy their contractual counterparties, to whom the shipowner or charterer will be an“associated person”, that necessary steps are being taken to limit the contractual counterparty’s exposure to prosecution.
The clause can be found on the BIMCO website.
Anti-corruption remains a hot topic and one to which all companies must be alert. Managing anti-corruption can be a difficult course to steer and so the steps taken by both BIMCO and the Chamber of Shipping are to be welcomed as a significant step forward in dealing with anti-corruption and bribery.