Articles,  Issue XXI, Jan 2021

Foreign Bribery Law: The Tool for Combating Transnational Bribery – Pioneer General Investments Plc.

As the Malawi Nation is still recovering from the devastating effects of the ‘cash-gate’ corruption scandal, the country is hit again by another scandal. This time around the corrupt act was committed in a foreign land.*

*The article is based on a hypothetical scenario as if there had recently been a scandal in a country in which one of the companies has engaged in foreign bribery. There has been some public discussion about whether a country should adopt a new foreign bribery law.

The news broke out recently that one of Malawi’s largest companies, Pioneer General Investments plc, has been embroiled in bribing public officials in Zimbabwe and Tanzania in order to be awarded different infrastructure contracts. Media reports indicated that the company paid an estimated sum of 300 million USD in bribes to foreign officials in the two countries. This scandal has again put Malawi on the international map for all the bad reasons.

Corruption is a global problem as it happens all over the world. For a developing nation like Malawi, the negative effects of corruption are very evident in different areas of people’s lives. Reports are rife of people lamenting the lack of basic needs like medicines and clean water; and therefore, in order to make good progress in combatting corruption and bribery there needs to be an active willingness by the society to tackle it both at the domestic and international level.

Most nations have well written domestic anti-corruption laws. However, the problem with these laws is that they focus much on corruption happening within the country and not so much on foreign bribery. For example, the Malawi Corrupt Practices Act (CPA) is a good legislation in many aspects. However, the CPA only addresses the issue of foreign bribery and corruption in a cursory manner. In very simple terms, foreign bribery is corrupting foreign public officials to get an advantage, for example, win contracts, licenses or to evade local taxes and laws. Section 53 (1) of the Act states that when an offence under the CPA is committed by a citizen or a resident of Malawi in any place outside Malawi, he may be dealt with in respect of such offence as if it had been committed within Malawi.

The use of the word “may” gives the provision only a permissive force rather than a mandatory one. Perhaps this is as a result of the obvious challenges that may arise in trying to investigate a crime in a foreign jurisdiction. It appears that whether or not the wrong doer is prosecuted for the offence is left to the discretion of the prosecuting authority. This is a major weakness in the legislation since it takes away the coercive force of the law to punish all offences of foreign bribery under the Act. For a nation to make strides in the fight against corruption, it should consider adopting a foreign bribery law whereby punishment of the offence of corrupting foreign officials is mandatory and not merely permissible under the law.

Some people might argue the following: why should we care about bribery that happens in another country outside our jurisdiction? Is it not up to the country where the bribery takes place to take action? This article is meant to shed some light and answer these questions.

Why Foreign Bribery Law for Malawi?

Bribery of foreign officials is as corrosive as domestic bribery. It impedes economic development, undermines the rule of law, distorts markets and raises the cost of doing business. Foreign bribery has huge damaging consequences for economies of all countries involved.

The Malawi Corrupt Practices Act (CPA), just like similar laws in other African countries such as Zambia and Kenya for example, is more focused on bribery that takes place within the country and not outside. The Malawi CPA is also only focused on individual liability and not on corporate liability. If an employee of a company is involved in bribery, he or she is liable for prosecution as an individual and will suffer the consequences of his actions even though he committed the act on behalf of his/ her company. The company is never punished and carries on its business as usual. This renders the legislation weak. The limited target of the CPA enforcement gives the corrupt people a hiding place in other countries. It enhances the corrupt company’s culture as they know that if they offer or give bribes to foreign officials they will not be prosecuted in their own country.

Punishing individual employees involved in corrupt practices and leaving unpunished the companies, which breed the corruption, contributes very little in the fight against corruption. Thus, this could be one of the reasons there is very slow progress in the fight against corruption in Malawi. If progress is going to be made in the fight against corruption, there is a great need to take a step further as a nation and start dealing with transnational bribery. This stand therefore calls for a legislative reform by adopting a ‘fully-fledged Foreign Bribery Law’.

The adoption of the Foreign Bribery Law will also be in line with Section 16 of the United Nations Convention against Corruption (UNCAC), of which Malawi is a member, requiring member states to ‘criminalize’ the bribery of foreign public officials and officials of public international organizations.

Anti-corruption efforts are strengthened by a strong domestic and international criminal legislation, which leaves no chance for bribery both within and outside the country.

Legislative Reform Success Stories

There are some success stories on legislative reforms in dealing with corporate bribery from which Malawi can learn. Notable statutes on foreign bribery are the 1977 U.S Foreign Corrupt Practices Act (FCPA) and the U.K. Bribery Act, 2010. The U.S FCPA was enacted in response to revelations of widespread bribery of foreign officials by U.S companies. The UK Bribery Act focuses on both bribery with private individuals and bribes paid to overseas officials.

Additional examples worth noting include the following; Brazil’s two landmark statutes; Clean Companies Act and Organized Crime Bill. The notable provisions of the Clean Companies Act are the prohibition of solicitation and offering a bribe. It imposes strict liability on a company for the acts of its employees, and that employees of state-owned enterprises are public officials since they are an extension of the government. Because of this legislative reform, Brazil is today one of the top enforcers of anti-corruption strategies.

Moreover, the enactment of South Korea’s Kim Young Ran Act (2016), which provides for joint penal provisions, makes both the company and the individual offender subject to punishment; for example, corporate criminal liability for negligent supervision. This further provides for limit on gift-giving within a very low monetary threshold (less than 50 USD) irrespective of non-proven intent. This law followed the 2014 South Korea Sewol Ferry Disaster investigations revealing that the Ferry operator did not follow the right safety procedures, which pointed to corruption.

The 2016 France’s Sapin II Law is the anti-corruption law which stipulates independent requirement for compliance program for large companies. Failure to implement the program is a free-standing offense. The law applies to any company with some or all of its operations in France.

The examples above show that the fight against corruption is now taking another important common step of tackling foreign bribery. This is a powerful tool in the fight against corruption both at domestic and international level.

Proposed Provisions of the Foreign Bribery Law

Taking the U.S. FCPA and the U.K. Bribery Act as models, the following provisions of the proposed Foreign Bribery Law are suggested.

Title

Foreign Bribery Act (FBA)

Jurisdiction. Who is covered by the Foreign Bribery Act?

Any company or entity incorporated under the Malawi Companies Act of 2012 and is listed on the Malawi Stock Exchange (MSE), or any officer, director, employee, agent or stockholder acting on behalf of the company.

Any individual who is a citizen, national or resident of Malawi or any corporation, association, business trust, partnership, sole proprietorship that is organized under the laws of Malawi or that has its principal place of business in Malawi.

Bribery of foreign public officials

The provisions prohibit offering to pay, paying, promising to pay or authorizing the payment of money or anything of value to a foreign official in order to influence an act or decision of the foreign official in his or her official capacity or to secure any other advantage in order to obtain or retain business.

This provision is aimed at creating a level playing field for honest businesses both at domestic and international level.

Commercial bribery

It shall be an offence for a person to offer, promise or give a financial or other advantage to another person intentionally and the other person receives it knowingly.

This provision is to prevent private to private bribery.

Third Party bribery

It shall be an offence to make corrupt payments through intermediaries. It shall be unlawful to make a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a foreign official.

Corporate liability

A company or organization shall be liable to civil or criminal prosecution if a person associated with it bribes another person intending to obtain or retain business or an advantage in the conduct of business for that company or organization and the company failed to prevent the bribery.

This provision will motivate the company leadership to invest in anti-corruption programs and compliance program so as to avoid such incidences.

Elements of an offense

The following must be present for an act to constitute violation of the FBA.

The briber must be any Malawian citizen, business entity or employee of a Malawian entity or any company listed on the Malawi Stock Exchange.

The bribe must be made corruptly and willfully.

Penalties

Both individuals and companies shall face potential civil and criminal penalties. The penalty for individuals shall be up to 10 years jail term and unlimited fines which cannot be paid by their companies.

Unlimited fines for the companies.

The penalties are meant to deter potential wrong doers.

Enforcement and Enforcement Agencies

Enforcement Agency shall be the Malawi Anti-Corruption Bureau.

Settlement Vehicles

There shall be several settlement vehicles which the companies could agree on with the enforcement Agency rather than going for a trial in a court of law. The settlement vehicles shall consider several factors as per each case and shall include;

Reduced sentence – If there were pre-existing compliance at the time of the violation, voluntary disclosure and internal investigations, cooperation with the enforcement Agency during their investigations by making all the necessary information available to them.

Disgorgement – the company shall agree to return the money made out of the bribery which would however not have been made.

Deferred and Non Prosecution Agreements (DPAs/ NPAs) – Out of court negotiations and resolutions.

These settlement vehicles serve as incentives for voluntary disclosures of any corrupt practices by the companies.

Conclusion

Corruption and bribery are transnational crimes which call for transnational efforts for an effective fight. Foreign bribery law is one effective tool for combating transnational bribery. Corruption and bribery cause unnecessary competition amongst transnational businesses and also compromises the quality of services or products. If corruption remains unchecked on the international scene, undeserving businesses are given contracts while the honest ones suffer. Having a fully-fledged foreign bribery law is thus, a key anti-corruption drive as it would help in creating a level playing field for all eligible businesses globally, which would in turn result in deliverance of high quality services and goods for the benefit of the masses.

Reference List

Chan Sik Ahn., 2019. What foreign companies should know about the Kim-Young-Ran law? Available at: <https://bcck.or.kr/bcck/foreign-companies-know-kim-young-ran-law/> [Accessed 29 October 2020].

Department of Justice and Securities and Exchange Commission, 2012. A resource guide to the U.S foreign corrupt practices act. [pdf] Washington DC: Department Of Justice and Securities and Exchange Commission. Available at: < https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf> [Accessed 26 March 2019].

Laws of Kenya, 2003. Anti-Corruption and Economic Crimes Act. [pdf]: National Council for Law Reporting. Available at: < http://extwprlegs1.fao.org/docs/pdf/ken128408.pdf> [Accessed 29 October 2020].

Ministry of Justice, 2011. The Bribery Act 2010 – guidance: [pdf] London: Available at <https://www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf> [Accessed 26 March 2019].

Spalding A., 2016. The four pillars of Brazil’s new anti-corruption regime. The FCPA blog, [blog] 28 July. Available at: <http://www.fcpablog.com/blog/2016/7/18/andy-spalding-the-four-pillars-of-brazils-olympic-governance.html> [Accessed on 26 March 2019].

The Anti-Corruption Act, Zambia., 2012. Available at: <http://www.parliament.gov.zm/sites/default/files/documents/acts/Anti%20Corruption%20Act%2C%202012.PDF> [Accessed 28 October 2020].