30. July 2014

Are companies compelled to engage in anti-corruption Collective Action?

Although there is no statutory obligation for companies to engage in anti-corruption Collective Action, there are references to it in guidance documents that have been issued by governments in relation to laws prohibiting bribery. These guidelines are used by companies when developing or reviewing their anti-corruption compliance programs, as well as when defining the scope of internal policies and procedures.

The UK Ministry of Justice issued the best-known guidance in this context in 2011 in relation to the UK Bribery Act. The Act introduced an offence of corporate failure to prevent bribery; and the only defence for a company is for it to be able to demonstrate that it has adequate procedures in place to address the risks of bribery. The UK guidance was developed by the government to help organizations understand the policy behind the UK Bribery Act 2010, and to set out the six principles that should inform the procedures to prevent corporate bribery liability.  Many companies have therefore used the guidance to gauge the adequacy of their existing procedures, as well as a guide for new policies.  

Many companies may however, have overlooked the recommendation relating to Collective Action that is explicitly mentioned in the Ministry of Justice’s Guidance.  The requirements relating to ‘top-level commitment’ as set out in Principle 2 state that effective formal statements that demonstrate top-level commitment are likely to include, ‘reference to the organization’s involvement in any collective action against bribery in, for example, the same business sector.’  The inclusion of Collective Action as part of a corporate compliance program may raise questions as to where it might best fit into existing compliance frameworks, and what it might entail in practice. There are a wide variety of examples of what companies might consider doing so that they too can claim they are engaged in Collective Action, two are outlined below.

In the UK Guidance there is a section on facilitation payments, and the government notes that such payments could in some circumstances cause potential liability for a company under the failure to prevent bribery offence, and is therefore a serious issue for companies to address. At the same time the government recognizes the problems that companies face in some parts of the world and in certain sectors. The eradication of facilitation payments will ‘require collaboration between international bodies, business representative bodies and sectoral organisations. Business themselves also have a role to play…’ In other words, Collective Action can help to tackle a widespread problem that needs sustained commitment by all those involved in the chain - from the companies that pay, to civil society to keep the focus on the issue, through to local law enforcement.

Given the increasingly critical stance towards facilitation payments taken by law enforcement agencies and organisations like the OECD, the need for concerted action by diverse actors to address such payments is becoming more urgent. It is therefore hardly surprising to see that there are a wide range of initiatives that target facilitation payments from a variety of standpoints. Examples include the Maritime Anti-Corruption Network, the IRU/UNGC Global Anti-Corruption Initiative, and the Turkish Customs Broker Ethics Initiative, amongst others. For companies to demonstrate engagement in Collective Action they should join these and similar initiatives, publicly support them on their corporate internet sites and encourage other companies to do likewise so that these initiatives grow in size and strength.

Another form of anti-corruption Collective Action is referenced in the US guidance for companies set out in the US Sentencing Commission - Guidelines Manual:

"As appropriate, a large organization should encourage small organizations (especially those that have, or seek to have, a business relationship with the large organization) to implement effective compliance and ethics programs."

This recommendation has been effective since the November 2004 amendments were made to the Guidelines, demonstrating that Collective Action is indeed nothing new and has been steadily gaining ground as a means to effect change and to raise anti-corruption standards.

An example of this type of Collective Action involving large companies helping their suppliers is to be found in a variation on the concept of an Integrity Pact by companies in the energy transmission sector in Argentina: ABB, Alstom Grid, Arteche, Lago Electromécanica, Tubos Transelectric SA and Siemens. Called a Compliance Pact, the agreement includes an obligation to abide by local laws, as well as the principles of the UN Convention Against Corruption and the Inter-American Convention against Corruption. It requires the parties to refrain from paying or accepting any kind of bribe and to avoid bid tampering and political donations. The principles are to be applied to employees and to business partners, and third parties; business relationships with parties who do not abide by its principles are to be avoided. In terms of enforcement, the Compliance Pact also establishes an ‘Ethics Committee’, which is a forum where signatory companies can exchange their experiences of anti-corruption issues and also raise concerns about each other’s business practices. The Ethics Committee may apply sanctions to a signatory company that breaches the Compliance Pact.

Companies should not overlook the fact that Collective Action is referenced in guidance documents relating to anti-corruption laws. By seeking to address the more challenging and deep-seated corruption problems in some countries and taking a pro-active and collaborative approach to such forms of corruption, companies can increase the strength and visibility of their anti-corruption program whilst also having an impact on the problem and the wider business environment.

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Gemma Aiolfi

Head of Compliance, Corporate Governance and Collective Action
+41 61 205 56 74
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