My foreign partner has insisted on sole control of any government approvals. Should I be concerned about prosecution for bribery?

  1. In 1977 the Foreign Corrupt Practices Act [1] was enacted by the US congress to specifically prohibit corrupt bribery of foreign officials by American persons and corporations and thus to restore public confidence in the integrity of the American business system. The anti-bribery provisions of the FCPA apply to U.S. publicly-traded and private companies, US citizens or residents and foreign nationals and entities who violate the FCPA while in the territory of the U.S. A non-U.S. person or company may face liability under the FCPA for using U.S. mails or emails that touch a U.S.-based server, or taking some other act in furtherance of an improper payment while in the territory of the U.S[2].
  2. The 34 OECD member countries and seven non-member countries adopted the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions[3] (“OECD Convention”)which criminalizes bribery of foreign public officials.
  3. The UN Convention against Corruption[4] (the “UN Convention”), which requires countries to establish criminal and other offences to cover a wide range of acts of corruption, if these are not already crimes under domestic law, entered into force on 14 December 2005.
  4. The UK Bribery Act[5], enforceable from July 1, 2011 has an even higher standard and covers bribery of private individuals and companies and not only foreign officials. It also incorporates an offence of failure to prevent bribery. All British citizens, UK residents, corporate bodies incorporated in the UK and who carry on business in the UK are subject to this Act.
  5. On February 2009, and March 2009, accordingly, Israel acceded to the UN Convention and the OECD Convention[6].Prior to acceding to both of these Conventions, on July 2008, the Israeli Penal Law of (was revised to amongst others include Article 291A[7]), which  prohibits offering or paying a bribe to a foreign public official for the purpose of obtaining business activity or obtaining a direct advantage in its conclusion.
  6. It should be noted that under the various legal frameworks listed above, in general a person is responsible vicarious promotion ie. If a representative of an Israeli company offers a bribe – the Israeli company is responsible and can be prosecuted in Israeli courts[8], as well as criminal proceedings in the foreign public official’s home state.
  7. It should be noted that where there are red flags or warning signs, not – knowing will not be a defense as they may be considered willful blindness and/or conscious disregard for corrupt practices.

Recommendations

1. Any distribution, representation, agency agreement should include an undertaking by the distributor/representative/agent to comply in full with the applicable bribery-anti-corruption provisions.

2. Be minded to red flags[9] as generally where there are warning signs; in situations of willful blindness and a conscious disregard for corrupt practices the company/individual may be convicted. There is no definitive or closed list of red flags, but certain countries/industries are considered more bribery-prone, unusual or convoluted ways of making payment, a larger than usual commission and a foreign partner insisting on sole control of any government approvals are generally considered red flags.

[1] 15 U.S.C. § 78dd-1
[2] http://www.internationaltradecomplianceupdate.com/blog.aspx?entry=697
[3] http://www.oecd.org/daf/anti-bribery/ConvCombatBribery_ENG.pdf
[4] http://www.unodc.org/documents/treaties/UNCAC/Publications/Convention/08-50026_E.pdf
[5] http://www.legislation.gov.uk/ukpga/2010/23/contents
[6] http://index.justice.gov.il/En/about/mankal/BattleBriberyCorruption/Pages/InIsrael.aspx
[7] http://index.justice.gov.il/En/about/mankal/BattleBriberyCorruption/Pages/TheOffenceBriberyForeignOfficia.aspx
[8] Under Israeli law the maximum penalty set for the offence of bribery of a foreign public official is seven years imprisonment and/or a fine of up to about 1.13 million ILS (approximately 221,000 EUR) for a natural person – or four times the benefit intended or obtained – whichever is higher, while a company can be fined up to about 2.26 million ILS (approximately 443,000 EUR) – or four times the benefit intended or obtained – whichever is higher.  

Beverley Zabow

About Beverley Zabow