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Freshfields Bruckhaus Deringer LLP Global investigations What’s new in the fight against bribery and corruption? Geoff Nicholas Adam Siegel Maxim Kulkov.

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Presentation on theme: "Freshfields Bruckhaus Deringer LLP Global investigations What’s new in the fight against bribery and corruption? Geoff Nicholas Adam Siegel Maxim Kulkov."— Presentation transcript:

1 Freshfields Bruckhaus Deringer LLP Global investigations What’s new in the fight against bribery and corruption? Geoff Nicholas Adam Siegel Maxim Kulkov Peter Yuen 27 March 2012

2 1 Today’s agenda and speakers Introduction UK Bribery Act update Geoff Nicholas Partner, London T M freshfields.com US FCPA update/global enforcement trends Brazil/India update Adam Siegel Partner, New York T M freshfields.com Russia updateMaxim Kulkov Partner, Moscow T M freshfields.com China updatePeter Yuen Partner, Hong Kong T M freshfields.com

3 2 UK Bribery Act update: a reminder of the key provisions General offences Offering, promising or giving a bribe Requesting, agreeing to receive or accepting a bribe Bribing a foreign public official Specific offence Corporate offence – failure to prevent bribery Penalties Individuals – up to 10 years’ imprisonment and/or an unlimited fine Corporations – unlimited fine Debarment from public contracting

4 3 UK Bribery Act update: whom does the UK Bribery Act apply to? An entity ‘doing business’ in the UK is liable for ‘bribes’ paid on its behalf by its ‘associated persons’ unless it has adopted ‘adequate procedures’ to prevent the conduct

5 4 UK Bribery Act update: the outstanding issues Facilitation payments Liability for third parties and likely impact Extraterritorial reach? Government guidance as to scope: ­‘demonstrable business presence’ in the UK ­UK listing? ­non-UK parent of UK subsidiary?

6 5 UK Bribery Act update: the SFO’s approach First prosecution under Bribery Act (October 2011) Launch of ‘SFO Confidential’ (1 November 2011) UK proposals for deferred prosecution agreements Use of civil recovery orders (eg Mabey Engineering (Holdings) Ltd) ‘People in the SFO are out there now actively looking for evidence of bribes that are being paid. This is a very high priority for us. Any companies that may have comforted themselves with the thought that nothing is going to happen will have a rude awakening when they start to see what the SFO is able to do in the future.’ (Richard Alderman, Director, Serious Fraud Office, 4 September 2011)

7 6 US FCPA update: a reminder of the key provisions Any corrupt act, in furtherance of An offer, payment or gift of any money or thing of value To any ­‘foreign official’ or ­other person for a foreign official To obtain or retain business or gain improper advantage Acts within and without the US For ‘Issuers’ and ‘Domestic concerns’ any act anywhere in furtherance Any enterprise or individual for an act in the US in furtherance of corrupt scheme

8 7 US FCPA update: accounting provisions FCPA amended ’34 Act to require US public companies to: Keep accurate books and records Establish and maintain a system of internal accounting controls Accurate books and records Issuers and subsidiaries Even facilitation payments must be recorded accurately Adequate system of internal accounting controls Issuers and subsidiaries Important focus of SEC, particularly post-SOX

9 8 US criminal and civil fines imposed on corporations Panalpina KBR Pride Shell ABB ENI Technip Alcatel Lucent BAE Daimler JGC Corporation Siemens

10 9 US FCPA update: enforcement trends Heightened enforcement: SEC and DOJ Increased staffing co-ordination and new SEC FCPA Unit Budget increases give SEC and DOJ additional resources to increase FCPA enforcement activities Focus on specific industries Major fines Cases against individuals Self-reporting expected Robust and verified compliance expected Focus on consultants, distributors, JVs, agents More whistleblowers (Dodd-Frank) DPAs, monitors and major disgorgement

11 10 Global enforcement trends: the stats of pending FCPA investigations relate to emerging markets $181m total bribery settlements in Nigeria with international companies 19% of international bribery enforcement activity involved extractive industries 26% of all ongoing US FCPA investigations involve the oil and gas sector bribery penalties (totalling $2.2bn) were paid by European companies 8 10 of the top ongoing investigations in Germany

12 11 Global enforcement trends: TI progress report 2011 Key Active enforcement Moderate enforcement Little/no enforcement

13 12 Global ABC enforcement trends Cross-border co-operation of multiple regulators Increase in action and results (especially US, UK and Germany) Increased focus on individuals Increase in follow on actions eg Nigeria, Greece, Turkey

14 13 Where has the US government focused its attention? Countries most frequently involved in FCPA investigations Key

15 14 Brazil: legislative changes and enforcement trends Current law Contained in a series of provisions in domestic federal and state laws Legislative changes Draft Bill 6826/2010 – intended to strengthen dramatically foreign bribery laws Key provisions include: prohibiting bribery of foreign public officials corporate liability increased sanctions (fines range from 1–20% of company’s gross revenue) Enforcement trends Active investigations involving international companies July 2011 – major scandal involving Brazilian Ministry of Transportation

16 15 India: legislative changes and enforcement trends Current law Contained in a patchwork of different laws Legislative changes ‘Jan Lokpal’ Bill aimed at tackling domestic corruption Key provisions include: Creation of independent agency to investigate and prosecute domestic officials/judges/politicians Investigations to be completed within one year/trial the following year Increased focus on foreign bribery: Foreign Public Officials Bill introduced into Indian Parliament (22 March 2011) Enforcement trends Supreme Court of India’s recent decision to cancel 122 mobile phone licences on the basis that allocation process favoured certain companies that bought licences at bargain prices

17 16 Russia: an overview of relevant laws and regulations Anti-corruption treaties to which Russia is a signatory UN Convention against Corruption, since 8 June 2006 The Council of Europe Criminal Law Convention on Corruption, since 1 February 2007 OECD, since 17 February 2012 (for the details see OECD Phase 1 Report dd 16 March 2012 at

18 17 Russia: legislative changes Recent amendments to the Russian anti-corruption laws On 4 May 2011, Russia enacted Federal Law No. 97-FZ: It is an offence to bribe not only Russian public officials but also foreign officials or officials of public international organisations (UN, IBRD, etc.) Administrative liability for legal persons has increased significantly. For example, for an especially large bribe (over RUB 20m) the fine is 100 times the amount of the bribery, but not less than RUB 100m (app. $3.5m)

19 18 Russia: legislative changes Legislative initiatives Oblige officials to declare their expenses Impose a criminal liability on legal persons consider offer/promise to give/take a bribe as a completed crime eliminate an ‘effective regret’ defence as it applies to foreign bribery Make the process for lifting immunity for persons alleged to be involved in foreign bribery more effective and transparent

20 19 Russia: enforcement trends Recent examples/areas of focus for enforcement activity Public procurement Obtaining state permissions/licences/certificates Customs violations lobbying privatisation of state and municipal property federal and municipal land lease (Mayor of Stavropol case) avoidance of administrative investigations/penalties (tax, customs, anti-trust, construction, fire, sanitary inspections) (Magtitsky case) unlawful judiciary (Krasnodar judge case)

21 20 China: an overview of relevant laws and regulations Bribery and corruption legislation Criminal Law – bribing of private persons and state workers Anti-unfair Competition Law – commercial bribery Various implementing, provisional rules and regulations and notices issued by, among others, SAIC, Supreme People’s Court and Supreme People’s Procuratorate Various internal party rules issued by China Communist Party

22 21 China: legislative changes Amendments to the PRC Criminal Law (VIII) Issued on 25 February 2011 and effective on 1 May 2011 Adds a new paragraph to Article 164 criminalising bribing a ‘foreign public official or officials of an international public organisation’ to seek unjust commercial benefits Unclear to what extent this amendment is intended to have any extraterritorial effect on PRC corporate entities First time the PRC government has stated its position on offering bribes to ‘foreign public officials and officials of international public organisations’ On 22 November, the government issued supplementary provisions setting threshold amounts of RMB 10,000 if the bribe is made by an individual and RMB 20,000 if the bribe is made by an organisation

23 22 China: enforcement trends China has taken a tough stance on some recent bribery cases with sentences including the death penalty for recipients of bribes ­in November 2011 the president of Shanghai Pharmaceutical was sentenced to death with a two-year reprieve for accepting bribes totalling more than US$1.8m and embezzling another US$5m ­in August 2011 the vice-chairman of China Mobile was sentenced to death with a two-year reprieve for accepting bribes totalling more than US$2.5m ­in November the head of Beijing Capital International Airport admitted to taking US$785,000 in bribes. His verdict is expected shortly. His predecessor was executed two years ago for accepting bribes of US$4.2m More than 60,000 people in China have been sentenced for bribery and corruption since 2008 In 2011, 10,542 investigations into commercial bribery were opened China is becoming more co-ordinated internally in its fight against corruption A nationwide database of corruption convictions has been created and can be accessed by application

24 23 China: enforcement trends Effect on foreign business in China China’s steps to combat corruption and bribery are not limited to government officials. China has prosecuted foreign employees of foreign companies In 2010 four Rio Tinto employees, including an Australian, citizen, were charged with a range of offenses including bribery and received prison sentences ranging from 7–14 years and were heavily fined In 2010 Toyota was fined US$20,850 for offering rebates to dealers for pushing customers to Toyota’s financing company over local banks for loans

25 24 Legislative and enforcement changes: what does it mean for you? Significant differences in anti-bribery and corruption legislation and enforcement (even within G20) CountryABC legislation score (/16) UK14.5 South Africa14 USA14 China13.5 Turkey13 Republic of Korea13 Russia12.5 Brazil12 Canada12 France12 Mexico12 Germany11.5 India11.5 Saudi Arabia11.5 Italy11 Argentina10.5 Australia10.5 Indonesia10 Japan9.5 Enforcement levels key Active Moderate Little

26 25 Legislative and enforcement changes: what does it mean for you?

27 26 Legislative and enforcement changes: what does it mean for you? Need to monitor developments in light of Ongoing review/revision of existing anti-bribery and corruption legislation Changes in policy on enforcement activity Implement global anti-bribery and corruption compliance policies But you also need to reflect local law requirements and risks in the jurisdictions in which you operate

28 27 Bribery Watch for more information contact

29 Freshfields Bruckhaus Deringer LLP Questions?

30 29 LON This material is for general information only and is not intended to provide legal advice. © Freshfields Bruckhaus Deringer LLP 2012


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