Just as with Fifa, we know the problem is there, but there is something of an international taboo over pointing the finger and stirring up concerns,” the British Prime Minister said of corruption at the recent G7 Summit. It is easy to dismiss bribery as something that happens elsewhere. It’s brown envelopes slid across hotel room coffee tables. It’s the FBI raiding Swiss hotels. It’s influencing arms deals. It’s bent public officials. It surely cannot be in the superyacht industry? Well it can and it does happen and we have all seen evidence of it. This is not the place to point fingers or spill beans, but the place to be aware of the seemingly innocent practices which actually may be illegal.
Let’s get one thing clear. Legitimate commissions are, well, legitimate. If a person is the effective cause of a transaction, a commission is due, provided that the payment and receipt thereof is transparent. If you feel like you have got something to hide, question if you should be making or receiving the payment. If payments are made to a whole chain of associated persons who are distant from the transaction, it becomes sketchy. Payments or even quite small corporate gifts, which have some commercial value, place the giver and receiver at risk.
Throughout the world, in particular in jurisdictions where the superyacht community work, there is law which outlaws bribery and some of that law goes beyond the boundaries of the law making country. Do a deal in US dollars and American law enforcement officers could be feeling your collar if something is corrupt. If you are British or work for a British company, the UK Bribery Act will apply. When the formal procedure of finding a berth is “bypassed” by giving a tip to somebody at the marina, for example, or a bottle of Macallan 1939 is gifted to a yacht captain to promote an agent to the owner, the question must be asked: are those legitimate gifts? As it may have already become obvious, there is no de minimis rule, i.e. even the smallest amount of money can be considered a bribe.
So, what is a bribe? The basic concept of a bribe is more or less the same throughout most jurisdictions,: it is a financial or other advantage intended to induce or reward the improper performance of a person’s function or activity (note, both briber and bribee are guilty of an offence). By “improper performance” we mean the performance that amounts to a breach of an expectation that a person will act in good faith, impartially or in accordance with a position of trust. With this in mind, trying to influence a captain by way of a gift to favour one charter broker over another would be a crime, equally if the captain suggested a cheeky backhander, that too would be a crime. On the other side, genuine corporate hospitality and similar business expenditure is recognised as an important business activity and such expenditure, as long as it is reasonable and proportionate, will not be caught by the Act.
The UK Bribery Act sets out several new criminal offences, such as:
– Offering, promising or giving a bribe to another person;
– Requesting, agreeing to receive or accepting a bribe;
– Bribing a foreign public official; and a corporate offence of failing to prevent bribery.
I cannot overstate its new territorial scope, which is worldwide. Prosecutions can be brought in the UK for primary offences committed anywhere in the world if the offender is deemed to have a “close connection” with the UK. This includes companies, partnerships, UK citizens or individuals resident in the UK. Also, individuals that expose UK companies to corporate liability by their overseas activities need have no connection with the UK at all; otherwise the company can still be prosecuted in the UK. The fact that the law has a worldwide scope means that companies with ties to both the UK and US potentially are exposed to both laws, multiplying compliance concerns.
Regarding bribing public officials, it is enough that the payer provides the official with an advantage intending to obtain or retain a business. In many jurisdictions harbour officials would be classed as public officials. The Act does not recognise, “facilitation payments”, which are exempted under the US Foreign Corrupt Practices Act (“FCPA”). This means that while a payment by an agent, a captain or a ship owner to a public official to fast-track the clearance of a vessel into a port, where no similar official service is available, may be exempt under the FCPA, it is likely to be an offence under the UK law.
Under Spanish law, the offering of a gift or reward to a public official just because of their position or duties is an offence, so improper conduct after the event can be caught on this basis. Even though Spain does not recognise the concept of “facilitation payments”, Spanish courts have held that low value gifts, which are common practice in the relevant area are not criminal. In a similar way, the Public Prosecutions Office Guidance issued in the Netherlands as well as the relevant Swiss Criminal Code does not prohibit “facilitation payments” made to foreign public officials. In Germany, however, any offer or promise to give a reward to a domestic official for the performance of their lawful duties has an even lower threshold than German law has in relation to any other kinds of bribery.
But what if – let’s say – such an offence is committed? As an overview, the penalties for an individual committing a crime under UK law are up to 10 years’ imprisonment, an unlimited fine and the disqualification of directors. Penalties for commercial organisations include an unlimited fine along with ensuing reputational damage and debarment from public contracts. In fact, Germany, Italy and Spain have similar penalties to the UK in relation to banning from public contracting in an event of such an offence. In Switzerland, the penalties for individuals are up to five years’ imprisonment, confiscation and up to CHF one million fine, whereas for corporate entities the fine can reach CHF five million. Italy’s penalties take a step further by including as penalties court supervision, withdrawal of licences and public funding. Under the FCPA, the relevant penalties are up to five years’ imprisonment along with a fine up to US$ 250,000 for an individual, or up to US$2 million for an entity. The above cannot compare to the Chinese penalties, which state that in extreme cases the death penalty may be enforced in the case of passive bribery.
In order to avoid living with the fear of the “unknown”, the UK Government – as well as the US Government on a similar basis – has issued guidance about procedures that commercial organisations can put in place. As expected, the guidance still leaves organisations, such as yacht owners, yacht managers and brokers to implement their own procedures. There are “adequate procedures” to prevent associated persons committing bribery and giving organisations a credible defence to bribery charges.
Does your organisation have:
– Proportionate procedures by way a policy on bribery and corruption
– Senior management commitment to anti-bribery policies
– Risk assessment procedures by ensuring all gifts above a defined threshold and/or a particular type need clear approval
– Due diligence on the people you deal with or the gifts to be made
– Communication (including clear anti-bribery training)
– Monitoring and review of how the organisation implements its anti- bribery policies
For example my own firm, Clyde & Co has a policy which makes it: “…a requirement for hospitality exceeding £300 (or local currency equivalent) per client head to be pre- approved […] Otherwise proposed expenditure above the £300 threshold must be reported […] for approval and logging. Regional Management Boards may issue further guidance regarding specific procedures to be applied in their regions. Please note that a lower limit of £100 (or local currency equivalent) applies to gifts and charitable donations.” Italy has also published guidelines by a leading employer’s federation where the procedures as described are substantially similar to the UK guidelines. In contrast, Spain has not put forward any guidelines, rather if the corporate entity shows that “adequate procedures” were in place, this is a complete defence where crimes are committed by the employees.
It is common practice nowadays for international companies and other organisations to publish summaries of their bribery control mechanisms and codes of conduct. Courts in France have shown that they may take into consideration such information when deciding whether the accused corporate entity has made considerable efforts to prevent bribery.
There are also countries like China, where the defence only relates to the period of time that has elapsed since the offence was committed, whereas Brazil, Austria and Belgium have no available defences to the crime of bribery. There is no right or wrong approach for implementing an anti-corruption compliance procedure. Whether in the UK or US, the enforcement authorities expect that companies will do their best to put in place adequate measures based in the relevant industry. Education is a huge part of it and just because it happens, does not make it OK.
This article originally appeared in Charter Index magazine.