Industrijuristgruppens 40. vinterseminar Compliance with Anti-Corruption and Anti Bribery Laws

Alexandra Wrage, TRACE Berit Stokke, Advokatfirmaet Thommessen

Corruption Highlights 2010/2011 Norway:

• 5 court sentences in 2010-1 supreme court -2 court of appeal and one first instance decision • 2011-one sentence already • Media storm on gifts to members of government • Contributions from state owned company to Senterpartiet, (fines NOK 120 000/50 000)

28.04.2020

Slide 2

Corruption Highlights – 2010/2011

• • • • • •

US Highlights

Dodd-Frank Act (whistle-blower , extractive industry disclosure) Industry-wide investigations (e.g., freight, oilfield services, pharma) Explicit enforcement focus on individuals More trials (challenging specific FCPA elements) More multi-jurisdictional cases (e.g., TSKJ) Aggressive enforcement methods (stings, wiretaps, analysts) • • •

UK Highlights

UK Bribery Act: – – Delay Impact Increased overall enforcement: 2 SFO future uncertain nd in actions after US

28.04.2020

Slide 3

Today’s Program

•

first outline

UK law the relevant anti-bribery provisions in Norwegian, US and •

compare

how the laws deal with certain topics: active/passive corruption, public officials, facilitation payments, gifts, hospitality and corporate criminal liability •

compare

consequences of violations/ sanction systems, penalty levels •

consequences

for development of compliance programs

28.04.2020

Slide 4

The Norwegian Penal Code 1902

New provisions in force from 4 July 2003 • sections 276 a., b. and c.

• implementing the the CoE convention 1999 on criminal liability for corruption • sections 275(breach of trust), sections 112 and 128 on domestic and foreign public officials, relevant for corrupt actions before 4 July 2003

28.04.2020

Slide 5

The new provisions-penalty levels

• §276 a. on corruption-fines or imprisonment of up to 3 years • 276 b. on

gross

(

grov

) corruption-fines or imprisonment of up to 10 years • 276 c. on trading-in –influence-(

påvirkingshandel

)-fines –imprisonment of up to 3 years

28.04.2020

Slide 6

Section 276 a. reads:

Any person who a) for himself or other persons, requests or receives an

improper advantage

or accepts an offer thereof in connection with a position, office or assignment or b) gives or offers anyone an

improper advantage

in connection with a position, office or assignment shall be liable to a penalty for corruption.

Position, office or assignment in the first paragraph also mean a position, office or assignment in a foreign country.

The penalty for corruption is fines or imprisonment of up to 3 years. Complicity is punished accordingly.

28.04.2020

Slide 7

What does this provision say?

• no use or definition of the word ”corruption” • ”position” /”office”/ or ”assignment”-covers public and private sector • • ”request”/”receive”, passive corruption/ ”offer”/”give”-active “improper advantage” • subsequent payments can be bribe • facilitation payments

28.04.2020

Slide 8

“Improper advantage” (utilbørlig fordel)

• Guidance only in the preparatory works and in the court sentences • Relevant factors: • Financial value of the advantage • What is common in the particular industry • Purpose of the advantage • The position of the active/passive briber – executive/non executive/public official

28.04.2020

Slide 9

Facilitation Payments

• not expressly carved out • covered by the law, the challenge is how to draw the limit • The norm in many countries that intermediaries are paid to facilitate hence a policy on facilitation payments may need to be developed • Tax law § 6-22: Illegal service or payment for such  deduction no tax

28.04.2020

Slide 10

276 a. what it covers:

• the law hits giving or receiving economic or other advantages of any kind, services etc.

• no carve out for promotional activities, hospitality or gifts • no carve out of facilitiation payments • or contracts with intermediaries

28.04.2020

Slide 11

276 a. what it covers cont..

• The words in the act are intentionally fluid • NOU 22:2002 and Ot.prp. 78 (2002 2003) only ”blamable acts” will constitute corruption • the court’s have in several decisions cited the preparatoy works • a challenge for industry as the law is ”fluid” and ”movable”

28.04.2020

Slide 12

276 b. , what it covers

• gross corruption • assessment of the higher penalty level- up to 10 years imprisonment • the position of the briber-public official/senior position of trust • false accounting-concealment

28.04.2020

Slide 13

276 c. what it covers

• Trading in influence påvirkningshandel • Novelty in Norwegian law - no court decisions yet • the Statoil fine on the Iran matter

28.04.2020

Slide 14

Trading in influence – section 276 c.

• The trading in influence agent seeks to influence the performance of a position, task or engagement of a decision-maker: for instance family member, social circle, political party • Difficult to draw line between criminal and legal trading in influence; lobbying is legal trading in influence and is permitted • Section 276 c. goes further than the CoE • No requirement with regard to the connection between the decision maker and trading agent

28.04.2020

Slide 15

The US Foreign Corrupt Practices Act (FCPA)

A

supply-side

focused,

foreign bribery

statute Two main provisions • Anti-bribery provision: – Prohibits corrupt payments to foreign officials, parties or candidates in order to “obtain or retain business” or securing any improper advantage • Recordkeeping and internal controls provision: – Imposes accounting obligations on companies whose securities are registered in the United States or are required to file reports with the SEC • • Keep good books Maintain a system of internal controls

28.04.2020

Slide 16

FCPA Elements

The five basic elements of FCPA anti-bribery section Just remember:

• The offer, promise, giving, or authorization of the giving • Anything of value • To a government official (defined broadly) • For an improper or corrupt purpose • To obtain or retain business

17

FCPA, Who and What?

•

Paying or Promising to Pay “Anything of Value”

– Applies to cash, in-kind gifts and services – No minimum value or threshold •

“Government Official” Includes the Following:

– Officers or employees of any foreign government and any department, agency, ministry or subdivision thereof – State-owned entities and their employees – Public international organizations (e.g., United Nations, regional development banks, ILO, WHO, World Bank, IMF, OECD) and their employees – Any person acting in an official capacity – Political party or candidate

18

FCPA, Why?

“Obtaining or Retaining Business”

• Payments made to obtain a specific contract or piece of business • Payments to secure any other advantage, such as: – Reduced taxes, duties or fees – Exemption from otherwise applicable permit or license requirements

19

FCPA, Third Parties

Companies can be liable for the improper payments made by third parties, such as sales representatives, distributors, joint venture partners, consultants and contractors: • If the company “knows” that the third party will use its compensation in a way that violates the law • You only need to have a firm belief that the particular circumstances exist, not actual knowledge • Can’t take a “head in the sand” attitude about third parties • Requires due diligence background checks

20

FCPA, continued

Items to note

• DOJ currently takes an expansive view of “instrumentality” • Facilitation payments exception for low level “grease” payments, but not a useful exception and companies increasingly barring all facilitating payments – Always illegal under the laws of the official’s country – Applies only to government action to which a company is already entitled without the exercise of discretion by a foreign official – Can be problematic if facilitation payments are made routinely – Only permitted by a handful of countries including Australia, the United States and Canada – not UK

21

FCPA, Affirmative Defenses

• Reasonable and bona fide expenditures for foreign officials – such as travel, meals and lodging – that are directly related to: – Promotion, demonstration or explanation of products, or the execution or performance of a contract – Must not be extravagant – Related local law compliance issues • Payments, gifts and offers that are legal under the written laws and regulations of the official’s country – Very limited, usually pertains to legal political contributions

22

The UK Anti-Bribery Act

•

UK Bribery Act (“Bribery Act”)

Contains 4 anti-bribery offenses: 1) Offer or payment of a bribe 2) Request or receipt of a bribe 3) Bribing a foreign public official • • • • 4)

Failing to prevent bribery

undertaken on behalf of company • Does not create any positive obligation regarding accounting, but the UK already has laws similar to FCPA accounting provisions The bribing and being bribed sections apply to domestic and private sector bribes as much as international The Bribery Act allows an affirmative defence against the fourth offense if “adequate procedures” are in place. (compliance program, internal controls, due diligence, etc) The bribery prevention section has caused concern —but current strong FCPA compliance will most likely be sufficient Does not require a “corrupt intent” like the FCPA

23

Comparative Review

• definition of bribery/corruption • improper criterion • active/passive bribery-private-public sector • public official • promotion/marketing/gifts /hospitality • facilitation payments • intermediaries-agents-joint ventures

28.04.2020

Slide 24

Consequences of violations

•

Corporate criminal liability

-Norway • section 48 a. the

enterprise

can be held criminally liable for contraventions of the provisions in the Penal Code by anyone acting for the enterprise • applies even if no individual person may be punished for the violation • penalty is fines or in the extreme loss of right to conduct the business

28.04.2020

Slide 25

Corporate criminal liability, Norway cont..

• the position of the employee • anonymous and cumulative violations • 48 b. assessment of the penalty •

compliance programs

specifically mentioned

28.04.2020

Slide 26

Civil liability: The Norwegian Tort Act § 1-6- March 2008

• right to seek damages for loss caused by corruption from the person who has intently or negligently caused or collaborated to the corruptive act • if corruptive act took place during work or services for an employer,

employer

can be held liable •

unless the employer has taken reasonable measures to avoid corruption

and liability does not appear reasonable all circumstances considered

28.04.2020

Slide 27

Corporate Criminal Liability

FCPA

• • •

Corporate Criminal Liability

(DOJ) Corporations held liable for FCPA violations of employees “Knowing” standard under the FCPA means that a company is equally liable whether an improper payment is made directly by the company’s employees or through a third party In most cases, a third party intermediary makes an improper payment rather than a company officer or employee directly

28.04.2020

Slide 28

Corporate Liability

• • •

Corporate Civil Liability

SEC or DOJ, but usually SEC Dodd ‐ Frank: FCPA whistle-blowers could receive a bounty of between 10 and 30% of fines and penalties over $1M FCPA contains no specific clause for private cause of action, but companies may face: – – – – Class action law suits for SEC violations Shareholder derivative law suits Class action ERISA law suits RICO/fraud suits by foreign government entities (e.g., Alba/Alcoa)

29

Territorial Reach of the Laws

•

Norway

Norwegian Penal Code section 12-no national borders but limited by resources and conventions

FCPA

• • • Trend has been towards territorial expansion of each category: (1) “issuers” – Any company whose securities are registered in the US or is required to file periodic reports with the SEC ( 2) “domestic concerns” – Citizens, residents and any corporation, company, partnership, etc organized under US law or principle place of business in US (and its officers, directors, employees,) (3) foreign nationals or businesses – (or an agent or national thereof) who take any action in furtherance of a corrupt payment while within the territory of the US

28.04.2020

Slide 30

Territorial Reach of the Laws, continued

UK Bribery Act

• • Current UK law: Applies to any individual or entity if acts or omissions occur in UK Or if UK citizen • • • Bribery Act will expand territorial reach: Covers bribery and attempted bribery anywhere in the world First three offences add a “close connection” test – – – A British citizen or passport holder A resident of the UK Incorporated in the UK or a partnership in Scotland Fourth offence (failure to prevent bribery) has broader jurisdictional reach – – Reaches any entity that “carries on a business” in the UK Covers employees without close connection to the UK; subsidiaries and agents (whether UK or not)

31

Penalty Levels

•

Norway

3 to 10 years • conditional or unconditional imprisonment? • return of gain (

inndragning)

• loss of license or right to operate a business • fine/penalty to company • compensation for economic loss- Tort Act section 1-6

28.04.2020

Slide 32

Penalty Levels

• •

US - Individuals

Up to $250k and 5 years per violation anti-bribery provisions Up to $5M and 20 years per violation of accounting provisions • Employers cannot indemnify individuals • •

US – Corporations

Up to $2M per violation of anti-bribery provisions Up to $25M per violation of the accounting provisions • • Between $10k and $500k in civil (SEC) fines Disgorgement of profits (Siemens $350M; KBR $177M)

28.04.2020

Slide 33

Penalty Levels, continued

• • •

US – Both Corporate and Individual

Alternatively, fines may be twice gain sought in making corrupt payment May face debarment sanctions from USG May face expensive Deferred or Non-Prosecution Agreements • • •

UK Bribery Act

All possible violations considered “criminal,” unlike FCPA Bribery Act does not distinguish between corporate and individual fines Two tracks of punishment 1) Summary Convictions (less severe, lower courts) -Maximum of $5k in fine -12 months in prison 2) Indictment Convictions -Unlimited fine -10 years in prison • Sets no limit on the corporate offense of failing to prevent bribery

34

Compliance Programs

• • •

Norway

legal basis- Penal Code section 48 b and the Tort Act section 1-6 No guidance from legislator as to the

content

of the compliance programs •

USA-

The FCPA •

The UK -

Bribery Act- guidance notice from Ministry of Justice

28.04.2020

Slide 35

Compliance program

• risk assessment of the business • top-level commitment • due diligence measures to ensure compliance • clear practical and accessible policies and procedures • effective implementation • training • discipline and incentives • monitoring and review • one program to apply world wide?

28.04.2020

Slide 36