When does a gift granted, or a tip paid, cross that fine line between a legitimate thank you and an attempt at soliciting an award in one’s favour?
Bribery and corruption may have indelibly fused into certain sectors of economic activity, particularly in those instances where government consent or approval are required or even (and perhaps more importantly) where public tenders are issued and eventually awarded. Indeed, one may think this is just a perception, though a survey carried out in 95 countries by Transparency International revealed that one person in four paid a bribe to a public official during 2013, with the healthcare and extractive industries (namely the hydrocarbons and minerals sectors) topping the list.
This sine qua non may seem like old hat, or perhaps for some a necessary evil, yet the enforcement measures against acts of bribery and corruption by companies and company agents (which includes any one acting on behalf of a company) are becoming progressively severe against offending companies, in particular when conducting business activities in the EU and North America, with the introduction of more robust laws having cross-border reach regulating the enforcement of the laws. This should not be underestimated.
When considering such offences the initial thought is one of monies offered and received without a legitimate business purpose. However, in practice, bribes may constitute anything of value given to a person with the intention of inducing that person to misuse his authority so that the person offering the bribe gains an improper advantage. Indeed, the person offering the bribe need not achieve the desired result, but for the mere attempt will be liable for the offence.
A thing of value may include gifts other than money, such as paid excursions, holiday trips, event tickets and promises of employment, among others. It is this less overt form of bribery that requires more attention in a business scenario, particularly in the context of a social reality where giving tips and sending hampers is common.
Certain gifts made to public officials by company agents may indeed be considered acceptable as gestures of gratitude or as a matter of custom; however, several international conventions and EU Council decisions and guidelines directed at tackling corrupt practices have prompted a new focus on the dividing line between these legitimate gifts and bribes. This is particularly evident in cross-border business activity where gifts are given during a tendering process or at a time when a company is seeking a contract renewal. In these instances such acts are increasingly viewed as acts of bribery, bringing about severe consequences ranging from punishment with imprisonment for natural persons, exclusion from participation in public contracts for the corporate entity and hefty corporate and individual fines.
Of key note here is that the cross-border element to economic activity renders companies operating in and from Malta and their agents increasingly answerable to foreign laws in addition to Maltese law.
Gifts given during a tendering process are viewed as acts of bribery
While definitions of bribery and corruption are largely similar across jurisdictions, the level of enforcement varies. For instance, the US Foreign Corrupt Practices Act, the first extra-territorial bribery and corruption law, has since 2004 been rigorously clamping down on improper payments made in foreign countries. Therefore, an act of bribery committed in Malta or by a Maltese company overseas may render such company or its agents liable under US law in instances where the Maltese company is, for instance, acting as subsidiary to a US principal, who in turn may also be held liable for the offence. Improper accounting is also regulated by the FCPA and caters for instances where a company lists ‘gifts’ as legitimate business expenditure, among others.
The UK Bribery Act is another heavyweight piece of foreign legislation applicable to Maltese companies and their employees when carrying on business or part of a business in the UK for acts of bribery to private individuals and public officials. The corporate and personal liability in the event of an offence could be hefty, with unlimited corporate fines and individual imprisonment up to 10 years for breaches of the UK Bribery Act, not to mention corporate reputational damage and blacklisting.
Maltese law on bribery and corruption has so far been largely enforced against the more overt corrupt practices such as the payment of monies for the award of a public contract or to achieve some other form of benefit. The ongoing Enemalta oil procurement and metering scandals are a case in point.
Maltese companies and company agents must, however, also be aware of potential cross-border liability under jurisdictions, such as the US and UK, where corrupt practices include less obvious forms.
A main concern for Maltese companies is an absence of knowledge that certain gestures of gratitude or standard industry practice (such as facility payments) in some countries may actually constitute acts of bribery in others. In this respect a thorough understanding of the laws, regulations and recent court decisions of the jurisdiction in which business activities are exercised in is essential.
A further concern is inextricable corporate liability in instances where an employee of the company is guilty of an offence committed for the benefit of the company when this was possible due to a lack of supervision or control by the said company.
In this respect there are various measures that companies may use to avoid instances of corporate liability, such as regular monitoring and review of employees’ activities, internal policies on acceptable gifts and practices, thorough due diligence on those performing services on behalf of the company and a general overall awareness of bribery risks.
While these measures may prove costly and necessitate a corporate cultural change, an analysis of recent local and foreign case law, their consequences and the value of out-of-court settlements attests that ‘an ounce of prevention is [truly] worth a pound of cure’.
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This article is not intended to offer professional advice and readers should not act upon the matters referred to in it without seeking specific advice.
Peter Grima is an advocate with Fenech & Fenech Advocates.