Copyright All rights reserved. Copyright All rights reserved. Foreign Corrupt Practices Act (FCPA) – value added for business or competitive disadvantage? by C. David DeBenedetti Unconventional Gas Committee Meeting May 8, 2012

Copyright All rights reserved. Copyright All rights reserved. Content 1. Foreign Corrupt Practices Act (FCPA) 2. Polish law 3. What is a bribe?

Copyright All rights reserved. Copyright All rights reserved. Foreign Corrupt Practices Act (FCPA) dates back to 1977 idea – prevention of corporate bribery of foreign officials cause – numerous incidents of major corruption within the biggest corporations during the 70’s

Copyright All rights reserved. Copyright All rights reserved. FCPA - first of its kind first regulation prohibiting corruptive actions towards foreign officials consequences – US companies operating at a disadvantage compared to foreign companies solution – Congress actions to obtain international agreement similar to the FCPA result – OECD Convention on Combating Bribery of Foreign Public Officials in International Business of 1997

Copyright All rights reserved. Copyright All rights reserved. FCPA – who? issuers (US or foreign corporation which has a class of securities registered pursuant to the Securities and Exchange Act of 1934) domestic concerns (US individuals, corporations and other business entities) persons other than issuers and domestic concerns or agents representing such persons, that give gifts or make payments to foreign officials while on the territory of the United States (broad interpretation by the Department of Justice)

Copyright All rights reserved. Copyright All rights reserved. FCPA – corrupt payments “corruptly make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of a value” (…) „in order to assist such [violator] in obtaining or retaining business for or with, or directing business to, any person” fine: up to USD 2,000,000 – for juridical persons, or up to USD 100,000 or/and 5 year imprisonment – for natural persons

Copyright All rights reserved. Copyright All rights reserved. FCPA – recipients of payments foreign official foreign political party or official thereof or any candidate for foreign political office any person, while knowing that all or a portion of received money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office (broad definitions)

Copyright All rights reserved. Copyright All rights reserved. Polish law - corporate liability primary law – Liability of Collective Entities for Actions Forbidden Under Threat of Imposition of Penalties Act of October 28, 2002 when a collective entity can be held liable? – a person connected with it committed e.g. crime of bribery confirmed by a final and enforceable court decision: finding such person guilty conditionally closing criminal proceedings against such person granting such a person permission to submit to liability closing further proceedings due to circumstances excluding punishment

Copyright All rights reserved. Copyright All rights reserved. Corporate liability – fine amounts from PLN 1,000 to PLN 5,000,000 no higher than 3% of the income achieved in the fiscal year in which the forbidden act constituting the basis for liability of the collective entity, was performed Possible ban from participating in public tenders and/or from conducting certain basic or other business activity (no case law yet, not much commentary)

Copyright All rights reserved. Copyright All rights reserved. Crime of bribery Polish anti-bribery law is incorporated in the Criminal Code Arts. 228 and 229 – corrupt acts towards the public officials, passive and active bribery respectively public official – examples: o politicians o judges, prosecutors, notaries and other public lawyers o employees of government administration o members of local government o employees of organizational unit governing the public funds

Copyright All rights reserved. Copyright All rights reserved. What is considered a “bribe”? Arts. 228, 229, 230 and 230a use the term “material or personal benefit”, According to art. 115 § 4 of the Criminal Code, a material or personal benefit is a material or personal benefit for thyself or for other person (natural or legal) the jurisprudence describes the material benefits as things or property rights (such as donation, discharging of debt, concluding a beneficial agreement, winning a tender) material benefits are considered as the material gain which leads to increase in assets or decrease in liabilities a material benefit can be considered agreement that contracts some specific actions in terms and conditions that differ from the socially and economically acknowledged standards

Copyright All rights reserved. Copyright All rights reserved. Relation between material benefit and official actions bribe is a material benefit (i) given to a public official just for being an official (e.g. to engage to more close relation) or (ii) given to a public official for settling a particular official business problems – circumstantial evidence example – can a situation, where a company invites a high public official to a conference organized by a company, which has an official business with such person, be considered as a bribe?

Copyright All rights reserved. Copyright All rights reserved. Thank you for your attention C. David DeBenedetti