Have you ever been in a nightclub so late that you’ve seen the lights come on? Correct me if I’m wrong, but those dark corners often look supremely unsexy and grubby under the bright lights. The UK Bribery Act 2010 became law on 1 July 2011 and in so doing the lights came on not only for UK business but also for UK citizens – wherever they may be.
Under the new UK law, bribery happens when there is an offer, a promise or some other advantage (that might not be financial) proffered by one person to another where there is the intention to use the advantage to persuade someone else not to do their job properly. At its rawest, it is passing a bung in exchange for winning a contract or perhaps a yacht insurance broker offering to pay a commission to a captain in exchange for the captain getting the yacht insured through that broker.
It is also a criminal offence if you are offering a sum of money or perhaps something else to someone who shouldn’t be taking any personal benefit because of the function they perform – for example, a bottle of 1986 Chateau Lafite-Rothschild Pauillac as a gift to a classification society surveyor conducting a survey, or a brown envelope full of cash paid to a local official to ensure a good mooring. Of course, the offence of taking a bribe occurs when you accept the bung or the offer of some other advantage in exchange for not performing your duties properly.
I can’t think of another single piece of English legislation that has lawyers and businesses from all over the world so interested. And it’s easy to understand why. The British bobby will, potentially, have extremely long arms to feel the collars of offenders wherever they may be. If you are a British national, if you are the director of a British company, not only are you caught but also the people who work for you are caught. It does not matter if you directly or indirectly employ those people. So widely is the net cast that if there are any Brits in the chain there may be a problem.
The basic rule is that anyone British has to ensure that any business they are involved in is totally transparent. If you are British and you have non-Brits on your team you should ensure that you have corporate control mechanisms in place to prevent the backhander.
Let me make one thing absolutely clear: legitimate commissions are ok. Normally, brokerage activity is ok. A transparent commission to people who can and should receive commissions is ok. Paying commissions to a company director who is buying a product or service from you is not good. A company director shouldn’t be getting anything paid to him privately and it’s a breach of his duty to the company and the shareholders to act in the best interests of the company.
So what about this business we call superyachting? In my 14 years in the business I have rarely met a yachtie who does not have a bribery story. But no one in our industry calls it bribery. We live in too glamorous a world to be associated with anything vaguely linked to dodgy deals or corrupt officials. But shine a light in the corners and it is no different. But what I have seen is custom and practice, which has probably existed since Sir Walter Raleigh was putting together his team to bring tobacco from the Americas. What probably started as innocent has become institutional.
When you decide to build a yacht, who pays the commission? Answer: the yacht builder. He pays the broker who brings the client to the yard. But what if the introducer is not a broker, but is, for example, a family member of the buyer, or a go-between, or a director of the buyer’s company? If there is no clear disclosure of the payment to people who really should not be getting commissions we are in bribery territory.
But even brokers need to be careful that the innocent act of brokering a deal does not fall foul of the law. The broker must be careful to document every yard he takes his client to. He must be careful not to inadvertently be seen to be manipulating the owner to build at a particular yard for reasons that could be seen as being connected to the size of the commission.
If there are material technical and commercial reasons for building at Yard A as opposed to Yard B, for heaven’s sake, document those reasons. This imposes a significant documentary compliance burden on those connected with UK brokerage houses or yacht builders. Even if you are a non-UK yard but you are dealing with a UK-connected broker or third party, the payment of the commission might be seen as a bribe and could see the directors of the yard subject to investigation and possible charges.
As an owner, even if you are not a UK national, a UK national who is crew and pays ‘a facilitation fee’ to get that prime berthing position will be committing a criminal act that you might be charged with if you do not give clear guidance that such payments are not to made. If you are a UK owner and you know these payments are made you will get into trouble.
The UK government has indicated that these facilitation payments might be acceptable if, in the circumstances, someone’s personal safety is at risk. A payment made in a god-forsaken place surrounded by Uzi submachine guns is one thing; a payment to a functionary of a yacht marina is quite a different story.
In terms of penalties, if tried as a summary offence (low level bribery), an individual could face a £5,000 fine and/or up to 12 months in prison. On indictment, there is an unlimited fine and 10 years in prison. For companies involved in bribery the fines are unlimited and the directors could be banned from acting as directors.
Now, is that berth really worth the risk?