Bribery and corruption is increasingly an issue of concern for multinational companies, especially when seeking to invest in “high risk” jurisdictions. Historically, the primary concern in this area has been exposure to civil and criminal penalties for contravention of anti-bribery and corruption legislation. However, recent years have seen a growing trend towards governmental expropriation of investments alleged to have been obtained by bribery and corruption. This poses a significant additional risk to foreign investors. Investors who are found to have engaged in corrupt practices will have difficulty defending against expropriation or seeking compensation for expropriation that might otherwise have been obtainable under either domestic or public international law. Unfortunately, in some cases, foreign officials may take retaliatory action against an investor for failing to pay a bribe. Organisations doing business abroad must remain vigilant about anti-bribery and corruption compliance. They must also consider what protections may be available under investment treaties for unfair or arbitrary state conduct that equates to an expropriation or another breach of applicable international standards.
Continue Reading Bribery and Corruption in Foreign Investments: Investors Beware
Much has been written on bribery and corruption in China, including the differences between criminal bribery and commercial bribery, and of course, the need for an effective compliance programme. However, foreign companies operating in certain complex or sensitive industries in China need to do more than instil an anti-corruption policy. What is needed is an in-depth understanding of the unique legal environment in their industries. This is because in some industries, particular conduct or business models permitted elsewhere, may be very sensitive and considered bribery or corruption. We recommend that companies operating in China adapt their compliance programme to account for industry specific regulations and sensitivities and undertake regular internal compliance audits as a check on the effectiveness of the compliance programme and to ensure that it remains up-to-date.
Continue Reading What does an Effective Anti-bribery and Corruption Programme Require?
By Liu Xiangwen, Monique Carrroll, Yang Jianyuan and Zhu Yuanyuan
Due to the sensitivity of commercial bribery, corporations can be reluctant to instigate internal anti-commercial bribery investigations as a check on the effectiveness of their compliance program. Often an internal investigation will only be commenced when a serious problem emerges in the internal management system, a judicial or governmental investigation is initiated or a complaint is received accusing the corporation of serious compliance issues. However, given the increasing global focus on anti-bribery and corruption compliance, the value of regular internal compliance investigations or ‘audits’ has increased. The objective of a compliance audit is to identify and deal with any problems or risk areas before they are obvious to third parties and escalate to the media’s attention. Where the audit uncovers a serious problem that must be reported to regulators, the company will be in a much better position to pro-actively manage the situation – hopefully with the result of minimizing any penalties imposed on the company.
Over the medium to long term, regular compliance audits will strengthen the compliance and risk awareness of both the company and its employees and therefore contribute to an enterprise culture of compliance. Such a culture would in turn contribute to the long-term and sustainable development of the company.
Continue Reading Internal Compliance Audits – the Why and How?
On 29 December 2010 the Information Office of the State Council (China’s cabinet) published a report detailing China’s past and present anti-corruption efforts (the "White Paper").1 This has been followed in quick succession by the publication of a report including the key facts and figures relating to China’s anti-corruption efforts in 2010 and a public statement by President Hu Jintao in his address to the Central Commission for Discipline Inspection that the Chinese government will wage a more forceful fight against corruption in future and that "More efforts should be made to investigate graft in key industries and key posts".2Continue Reading Details of China’s Efforts to Combat Corruption and Build a Clean Government Published in State Council White Paper
Many foreign business operators report that they are concerned about the risks associated with entertaining their business partners in China, even when providing meals or offering to pay for travel and accommodation costs of a low value.
Continue Reading Offering Gifts of Travel and Entertainment in China – What if the Recipient is a State Functionary