Serious Consequences For Bribery
By Thomas Timlen
Last year ended with the surprising news that Keppel Offshore & Marine Ltd. and its wholly-owned U.S. subsidiary, Keppel Offshore & Marine USA Inc., had agreed to pay a combined total penalty of more than US$422 million to resolve charges with authorities in the U.S., Brazil and Singapore arising out of a decade-long scheme to pay millions of dollars in bribes to officials in Brazil.
The penalty resulted from Keppel’s violations of the U.S. Foreign Corrupt Practices Act, or FCPA, anti-bribery provisions and similar provisions of Brazilian and Singaporean law.
This case and others coming to light prove that today’s anti-bribery laws are unflinching in their pursuit and conviction of those that pay bribes and facilitation payments to get project cargoes moving. Like Keppel, shippers, carriers and forwarders in the project cargo transportation sector can also be exposed to anti-bribery laws in multiple jurisdictions during the scope of a single move.
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While some project cargo companies might have taken the threat on board, many more have yet to codify their anti-bribery policies. The message to all staff needs to be unequivocal: high ethical standards must be upheld and there is zero tolerance regarding any illegal activities, including involvement with bribery of any kind. In other words, if an employee is caught offering or receiving a bribe, they should expect to be fired.
A spokesperson for logistics specialist A2M Global told Breakbulk that intermediate staff act as the gatekeepers holding “dishonest” people at bay. A2M prompts employees to remain cautious when new leads arise and that due diligence must be undertaken. Although specific anti-bribery training and whistle-blower policies are not in place, the company said it relies on staff being aware of current market “habits” in commercial situations, with intensified scrutiny being applied on a case-by-case basis depending upon the specific owner, charterer and circumstances involved.
A key measure that A2M Global has implemented to ensure that employees fully appreciate the consequences relating to bribery is the inclusion of related terms in staff employment contracts, where one condition of employment is to agree to refrain from all questionable practices, in particular, accepting monetary gifts.
Although it did not play a role in the Keppel enforcement actions, the UK Bribery Act is one of numerous national laws with far-reaching impact. It joins hard-hitting anti-bribery laws in the U.S., Brazil and Singapore, as well as a similar law that is now being enforced by China.
David Zhou Yi, a senior partner at Co-Effort Law Firm LLP in Shanghai, explains that China has been vigorously improving its legislation with respect to anti-corruption and anti-bribery activities in order to regulate and enhance corporate governance and compliance, both internally and externally.
“In some industries involving big-ticket transactions such as construction, banking and transportation, particularly for project and heavy-lift cargo, anti-corruption, anti-bribery and anti-monopoly issues are kept in focus and fought against by both market players and law enforcement authorities alike,” Zhou said.
“For example, the Anti-unfair-competition Law of the People’s Republic of China, or PRC, specifically includes clauses tackling bribery in business, which could result in confiscation of illegal incomes, penalties, revocation of business licenses up to criminal liabilities. The State Administration for Industry and Commerce of the PRC has promulgated the rules prohibiting commercial bribery, which provisions are generally referenced and quoted in judicial practice. Shipping is an international business that may be governed by the laws of multiple jurisdictions. Therefore companies in this industry should be aware of the legislation, not only in the port of loading, but also at the places of transshipment, destination and more.”
Complacency is not an option, as Zhou pointed out: “As we know, the U.S. has the FCPA, the UK enacted the Anti-bribery Act, and there are additional countries and regions having their own rules and regulations regarding anti-corruption and anti-bribery issues. We suggest that operators engaged in cross-border business be more serious on these topics, train the staff from time to time, and set up an effective compliance mechanism imperatively.”
For the heavy-lift and project cargo transport sector, an effective compliance mechanism could include use of the BIMCO Anti-Corruption Clause in contracts of carriage such as Heavycon 2007, Heavyliftvoy, Projectcon, Supplytime, Windtime and Bargehire.
“I can’t see any reason not to include the clause in any particular charter, including the standard forms mentioned,” HFW Partner Daniel Martin explained. “The clause is intended to cover both time and voyage charters, and to set out some general principles which should be applicable across all charters.”
From Martin’s experience, trade has embraced use of the BIMCO clause as an effective preventative measure. “I tend to see the clause, or equivalents, in most charters which come across my desk. To that extent I think the clause has been well received.” That said, he conceded that there are the usual issues about whether it is too owner- or charterer-friendly.
The clause was published in 2015, but still remains relevent as stakeholders can tailor the clause with their own wording to fit their particular niche.
K. Murali Pany, managing partner at Joseph Tan Jude Benny LLP, noted that the BIMCO clause provides clarity, certainty and aligns the interests of the owners and charterers to take a stand against corruption.
“There is a clear contractual remedy for the consequences of bribery and corruption,” Pany said. “In short, the clause allows the innocent party to terminate the charterparty without any liability and without prejudice to its other rights if a breach of the clause causes the innocent party to also be in breach. Further, whichever party fails to comply with any anti-corruption legislation, that party shall defend and indemnify the other party against any fine, loss, damage and cost including court and legal costs to the other party arising from the breach.”
The clause also allocates the risk and cost of compliance, he added. So if any official, contractor, sub-contractor, or person not employed by the owner or charterer demands payment, goods or anything of value from the master or the owner, the master or the owner must take reasonable steps to resist the demand.
“If despite reasonable steps, the demand persists, the master or the owner may issue a letter of protest to the charterers,” Pany said. “Once the letter is issued, any delay to the vessel is deemed to be the result of resisting the demand, and a) the vessel remains on hire, or b) any time lost shall count as laytime, or if vessel is on demurrage, count as time on demurrage.”
With a widespread policy approach at a national and international level against bribery and corruption, many international and multinational company contracts already incorporate anti-bribery and corruption provisions. For project cargo shippers, this should be seem as part of prudent risk management, especially if the project is taking place in a region where there are bribery and corruption risks.
However, project cargo movers should not rely solely upon protections found in contracts. Perhaps the time has come for a more robust implementation of anti-bribery policy among all stakeholders, large and small, as Keppel has learned the hard way.
Thomas Timlen is a Singapore-based freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.
Photo credit: Yuli Seperi/ZUMA Press/Newscom
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