1. Shipping and Corrupt Practices Intertanko Presentation
Philip Roche
Partner
Emma Humphries
Associate
14 June 2011

2. UK Bribery Act 2010 Introduction - the UK Bribery Act?
Why is shipping considered a risk?
Key features of the Act
Facilitation payments
Complying with the Act and Adequate Procedures
Compliance – what do you need to do?

3. Bribery Act Why is it important to you:
1. Jurisdiction – companies doing business or part of their business in the UK
2. Counterparts
3. General International Change in approach

4. General Change in Approach

5. OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
15 February 1999.
The 34 OECD member countries and four non-member countries - Argentina, Brazil, Bulgaria, and South Africa -have adopted this Convention
The Convention permits countries to move in a co-ordinated manner to adopt national legislation making it a crime to bribe foreign public officials. It provides a broad definition of bribery, requiring countries to impose dissuasive sanctions and committing them to providing mutual legal assistance.

6. 2009 Recommendation for Further Combating Bribery of Foreign Public Officials in International Business
Adopt best practices for making companies liable for foreign bribery so that they cannot avoid detection, investigation and prosecution for such bribery by using agents and intermediaries, including foreign subsidiaries, to bribe for them;
Periodically review policies and approach on small facilitation payments. These are legal in some countries if the payment is made to a government employee to speed up an administrative process;
Improve cooperation between countries for the sharing of information
Provide effective channels for public officials to report suspected foreign bribery and for protecting whistleblowers from retaliation; and
Working with the private sector to adopt more stringent internal controls, ethics and compliance programmes and measures to prevent and detect bribery.

7. Typical Bribery in the News

8. Corruption in Shipping
May 2010 City of London Corporation Survey on avoiding corruption risks in the City
Identified the maritime and shipping industry as one of the most ‘high risk’ industries likely to be affected by the Act

9. Key Features of the UK Bribery Act
The new UK Bribery Act comes into force in July 2011
Guidance
SFO 2009 paper “Approach of the Serious Fraud Office to dealing with overseas corruption”
MOJ Guidance on “Adequate Procedures”
MOJ circular on Bribery Act
Joint Legal Guidance for Prosecutors 9 9

10. Key Features of the UK Bribery Act
Two major categories of risk:
Actual corrupt practices
Bribery
Address Commissions
Brokerage commissions
Facilitation payments
Day to day “oiling the wheels”

11. Key Features of the UK Bribery Act
The general bribery offences
someone offers, promises or gives another, or
requests, agrees to receive or accepts
a financial or other advantage
in connection with a person performing a function improperly
Improper performance is the breach of an expectation that the function will be performed in good faith, impartially or as a result of a position of trust.
No corrupt intent required.
The offences extend to “private bribery” 11 11

12. Key Features of the UK Bribery Act
Bribing a Foreign Public Official (FPO)
someone pays or offers an advantage to a FPO
with the intention of influencing the FPO
in order to retain or obtain a business advantage
when such payment / advantage is not permitted or required by written law
Note: No need for improper performance of function 12 12

13. Key Features of the UK Bribery Act
Facilitation Payments
Not permitted (contrary to FCPA exception)
Written law is relevant, not local custom 13 13

14. Key Features of the UK Bribery Act
Failure of commercial organisations to prevent bribery
Corporate entity commits an offence if it, or anyone associated with it, bribes another person in order to retain or obtain a business advantage.
Outward bribery only
Associated person is widely defined: includes anyone who performs services for or on behalf of the company
This could be employees, agents, brokers, subsidiaries, JV entities, JV partners
Strict liability offence. Only defence is that the company has adequate procedures in place to prevent bribery

15. Key Features of the UK Bribery Act
Strict liability of the Company for acts of bribery done by associated persons
New offence of ‘failing to prevent bribery’
Liability without fault
Only defence – “adequate procedures”
Fines – Aon - £5.5m

16. Key Features of the UK Bribery Act
Extra-Territoriality
General and FPO bribery offences: if any part of the offence is committed in the UK or if committed overseas by a person with a close connection to the UK
Corporate bribery offence: it is irrelevant where the acts/omissions which form part of the offence take place.
Applies globally to companies who carry on any part of their business in the UK
UK management companies
UK chartering brokers/insurance offices
Companies with UK agents/distributors? 16 16

17. Facilitation Payments
Counterparts
oil majors
banks
purchasers of businesses
commodity traders
energy companies
BG Clause

18. Counterpart Risk and Expectation
Many major global corporates will set the UK Act as the “gold standard” for anti-corruption requirements of counterparts
An example from a shipping contract;

19. Energy Major Contract for Services
Contractor represents, warrants and covenants that it and its Representatives have not Offered and will not Offer with respect to any Matters any Advantage to any Public Official which would violate Applicable Corruption Law.

20. Energy Major Contract for Services (2)
Contractor represents, warrants and covenants that it and its Representatives have not Offered and will not Offer with respect to any Matters any Advantage to any Public Official which would violate Applicable Corruption Law.
“Advantage” means any financial or other advantage, payment, gift, promise or transfer of anything of value.

21. Energy Major Contract for Services (3)
Contractor represents, warrants and covenants that it and its Representatives have not Offered and will not Offer with respect to any Matters any Advantage to any Public Official which would violate Applicable Corruption Law.
“Advantage” means any financial or other advantage, payment, gift, promise or transfer of anything of value.
Applicable Corruption Law" means all of the laws, rules, regulations and other legally binding measures relating to bribery, corruption, money laundering, fraud or similar activities:
- of [relevant country of operation];
- of the country of incorporation of Contractor and Contractor's ultimate parent company and of the principal place of business of such ultimate parent company;
together with the provisions of the United Kingdom Bribery Act 2010 and the United States Foreign Corrupt Practices Act of 1977….

22. Facilitation payments
Oiling the wheels
Customs officials
Port State Control
Stevedores
Port/Canal Authorities
Hospitality
Firm view of SFO that these are an “advantage”

23. How to ensure compliance
Only defence is to show that “Adequate procedures” have been implemented
Local consultants/agents should not be engaged without thorough due diligence
Beware of standard business practices which are affected by the Act i.e. client hospitality, facilitation payments, allowing agents to arrange business
‘Tone from the top’ – adopt a zero tolerance culture

24. How to ensure compliance - continued
Risk assessment – regular and thorough
Policies and procedures must be clear and practical
Effective implementation across the business
Monitor and review compliance

25. Goals of Risk Assessment Risk Assessment (Per MOJ Guidance)
“The commercial organisation [must] regularly and comprehensively [assess] the nature and extent of the risks relating to bribery to which it is exposed”
A tailored approach
Focus on:
Internal risk
Country risk
Partnership risk
Ongoing responsibility 25 25

26. Goals of Risk Assessment
Identify ongoing risk
Assess identified risk – severity and likelihood
Pragmatic and cost effective approach
Risk Mitigation – a risk assessment should inform (1) the development, implementation and maintenance of effective anti-bribery policies and procedures (2) remedial steps. 26 26

27. Key Features of the UK Bribery Act Adequate Procedures: “Six principles”
1. Risk Assessment
2. Top Level Commitm-ent
3. Due Diligence
4. Clear Policies & Procedures
5. Effective Implementati-on
6. Monitoring and Review 27

28. Anti-Bribery Policy Statement – zero tolerance approach
Head of Compliance
Scope of Policy
Reporting – whistleblowing
Training
Monitor and Review

29. FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE AND COMMODITIES TRANSPORT TECHNOLOGY