Anti-Bribery and Corruption Review - July 2015 - Clifford ...

Anti-Bribery and Corruption ReviewJuly 2015

Global contacts........................................................ 3

World Map ................................................................ 4

Foreword .................................................................. 6

Europe, the Middle East and Africa....................... 7

Czech Republic..................................................... 8

France .................................................................. 9

Germany............................................................... 11

Italy ....................................................................... 14

Poland .................................................................. 15

Romania ............................................................... 16

Russia................................................................... 17

Saudi Arabia ......................................................... 18

Slovak Republic .................................................... 19

Spain .................................................................... 20

The Netherlands ................................................... 22

Turkey ................................................................... 24

Ukraine ................................................................. 25

United Arab Emirates ............................................ 26

United Kingdom.................................................... 27

The Americas ........................................................... 29

Brazil..................................................................... 30

United States of America ...................................... 31

Asia Pacific............................................................... 33

Australia................................................................ 34

Hong Kong ........................................................... 35

Indonesia .............................................................. 37

Japan ................................................................... 39

South Korea.......................................................... 40

People’s Republic of China ................................... 41

Singapore ............................................................. 43

Thailand ................................................................ 44

Worldwide contact information.............................. 47

cont

ents

3Anti-Bribery and Corruption ReviewJuly 2015

© Clifford Chance, July 2015

Global contactsEurope, the Middle East and AfricaBelgiumSébastien Ryelandt +32 2533 5988Dorothee Vermeiren +32 2533 5063

Czech RepublicVlad Petrus +420 22255 5207Jindrich Arabasz +420 22255 5202

FranceThomas Baudesson +33 14405 5443Charles-Henri Boeringer +33 14405 2464Arthur Millerand +33 14405 5446

GermanyHeiner Hugger +49 697199 1283David Pasewaldt +49 697199 1453Jochen Pörtge +49 2114355 5459

ItalyAntonio Golino +39 028063 4509Benedetta Venturato +39 028063 4255

LuxembourgAlbert Moro +352 485050 204Claude Eischen +352 485050 268

MoroccoMustapha Mourahib +33 14405 5152

PolandMarcin Cieminski +48 22429 9515Pawel Pogorzelski +48 22429 9508

RomaniaDaniel Badea +40 216666 101Bianca Alecu +40 216666 127

RussiaTimur Aitkulov +7 495725 6415Olga Semushina +7 495725 6418

Saudi ArabiaGraham Lovett +971 43620 625Khalid Al-Abdulkareem +966 11481 9740

Slovak RepublicVlad Petrus +420 22255 5207Miroslava Obdrzalkova +420 22255 5243

SpainBernardo Del Rosal +34 91590 7566Manuel Sanchez-Puelles +34 91590 4194

The NetherlandsJeroen Ouwehand +31 20711 9130Stana Maric +31 20711 9806Simone Peek +31 20711 9182

TurkeyMete Yegin +90 212339 0012Zeynep Düzgören +90 212339 0000

UkraineJared Grubb +380 44390 2236Yevhen Deyneko +380 44390 2272Iryna Yelisyeyeva +380 44390 2202

United Arab EmiratesJames Abbott +971 43620 608Christopher Young +971 43620 616

United KingdomRoger Best +44 20 7006 1640Luke Tolaini +44 20 7006 4666Patricia Barratt +44 20 7006 8853

The AmericasBrazilThomas Lemouche +55 11 3019 6027

United States of AmericaDavid DiBari +1 202 912 5098David Raskin +1 212 878 3438Megan Gordon +1 202 912 5021Polly Snyder +1 202 912 5025

Asia PacificAustraliaDiana Chang +61 28922 8003Jenni Hill +61 89262 5582Kirsten Scott +61 89262 5517

Hong KongWendy Wysong +852 2826 3460Montse Ferrer de Sanjose +852 2826 3562Richard Sharpe +852 2826 2427

IndonesiaLinda Widyati +62 21 2988 8301Gideon Manullang +62 21 2988 8348

JapanMichelle Mizutani +81 35561 6646Masayuki Okamoto +81 35561 6665

South KoreaThomas Walsh +822 6353 8110Dan Park +822 6353 8116

People’s Republic of ChinaWendy Wysong +852 2826 3460Lei Shi +852 2826 3547Tina Wu +86 106535 2264

SingaporeNish Shetty +65 6410 2285Janice Goh +65 6661 2021Shobna Chandran +65 6410 2281

ThailandAndrew Matthews +66 2401 8822Vipavee Kaosala +66 2401 8829

4 Anti-Bribery and Corruption ReviewJuly 2015


UNITEDKINGDOM

THE NETHERLANDS

GERMANY

CZECHREPUBLIC

FRANCE

SPAIN

ITALY

UNITED STATESOF AMERICA

BRAZIL

World MapPlease click on the country name on the interactive mapbelow to take you directly to the relevant chapter.



SLOVAKREPUBLIC

POLAND

ROMANIA

UKRAINE

TURKEY

UNITED ARABEMIRATES

SAUDI ARABIA

AUSTRALIA

THAILAND

JAPAN

HONG KONG

PEOPLE’S REPUBLICOF CHINA

RUSSIA

SINGAPORE

INDONESIA

SOUTH KOREA


Foreword


Prosecutions for bribery and corruption continue to attract media headlines around theworld and, in response, international companies continue to review what they have todo to address the risks to their business, and to their reputation. Fundamental to thisis staying on top of relevant legislative developments and enforcement trends in thecountries in which they operate. Some national authorities have even highlighted thisinformation gathering as a regulatory requirement for directors and senior corporateofficers. This review looks at recent developments in some of the jurisdictions aroundthe world where we have offices, focusing particularly on changes to legislation, bothrecent and proposed, and on prosecutions and enforcement trends. We intend toproduce updates at regular intervals.

Patricia Barratt and David Pasewaldt, Editors

Europe, the Middle East and Africa

Changes to legislationIn May 2015, the Government’s expertgroup on the issue of corruptionexpressed its support for three draftamendments that had been prepared bythe Czech branch of TransparencyInternational: (i) a draft amendment to thePolitical Parties Act that establishes anauthority responsible for the supervisionof the financing of political parties; (ii) a draftamendment to the Electoral Act thatprohibits donations by corporations topolitical parties; and (iii) a draft of aGovernment Decree that provides forbetter protection of whistleblowers fromamong state clerks.

In May 2015, the Government approvedthe draft of an amendment to the Act onPublic Prosecutors that, inter alia,establishes a special Public Prosecutor’sOffice responsible for significantcorruption cases. In recent years, severalMinisters of Justice have tried to amendthe Act on Public Prosecutors, with nosuccess as yet.

ProsecutionsIn February 2014, an influentialPrague-based lobbyist was arrested andcharged with fraud in relation to the city-runpublic transport company. In May 2015, theCourt returned the case to the prosecutoron the basis of procedural errors.

In October 2012, an advisor to a formerPrime Minister was charged with fraud in

relation to the government’s purchase ofarmoured personnel carriers. Thecriminal proceedings are still pendingbefore the Court.

In June 2012, a former Defence Ministerwas charged with the misuse of power.She was stripped of her parliamentaryimmunity later that year. The case is stillbeing investigated; an indictment isexpected to be filed this year.

In May 2012, a Member of Parliamentand Regional Governor, as well asseveral other people, were arrested andcharged with taking bribes. TheMember of Parliament was stripped ofhis parliamentary immunity later thatyear. In April 2015, two of the otheraccused were each sentenced to sevenand a half years in prison; however, theverdict has not yet taken effect. Thecriminal proceedings in relation to theformer Member of Parliament andRegional Governor are still pendingbefore the Court.

OECD report on anti-briberypublishedIn May 2015, the Organisation forEconomic Co-Operation andDevelopment (OECD) published its latestreport on the compliance of the CzechRepublic with its obligations under theOECD Convention on Combating Briberyof Foreign Public Officials in InternationalBusiness Transactions1.

The report states that since the CzechRepublic’s Phase 3 Report in March2013, out of 21 separaterecommendations, it has fullyimplemented five, partially implementedten, and not implemented six. Accordingto the OECD Working Group, the CzechRepublic still needs to make significantprogress on certain keyrecommendations concerning itslegislative and institutional framework forimplementing the Anti-BriberyConvention. This includes implementingthe recommendation to guarantee greaterindependence of prosecutors so thatpolitical considerations cannot be takeninto consideration, which has not beenimplemented yet (as mentioned above).

The report also points out that althoughbribes are expressly non-tax deductibleunder the law in the Czech Republic,virtually no further steps have been takensince Phase 3 to increase the awarenessof the tax authorities and the privatesector that bribes to foreign publicofficials are not tax deductible. Inaddition, training has not been providedto the tax authorities on how to detectbribe payments that are disguised asallowable expenses in tax returns.Protection for whistleblowers is alsoconsidered inadequate, until theamendment referred to above is adoptedby Parliament.

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Czech Republic


1 Czech Republic: Follow Up to the Phase 3 Report & Recommendations May 2015, available at: http://www.oecd.org/daf/anti-bribery/CzechRepublicphase3reportEN.pdf.

http://www.oecd.org/daf/anti-bribery/CzechRepublicphase3reportEN.pdf



Changes to legislationFrance has recently increased thepenalties for the offences of corruptionand trading in influence.Law-n°2013-1117 dated 6 December2013 addressing the fight against taxfraud and serious economic and financialcrime has given the courts the power toincrease fines to EUR 1 million, or todouble the amount of proceeds derivedfrom the offence, if higher. Naturalpersons may also incur a prison sentenceof up to 10 years.

Another law passed on the same datehas established a new financialprosecutor (see below).

In addition, the laws adopted inDecember 2013 include: (i) provisions toprotect whistle blowers and witnessesreporting corruption; (ii) measuresallowing anti-corruption associations tojoin the criminal prosecutions as civilclaimants; and (iii) measures tostrengthen investigative capacity (specialinvestigative techniques used in theprosecution of organized crime cases,such as the use of undercover agents).

A decree dated 25 October 2013 createda Central Office for combating corruptionand preventing financial and tax offences(“Office central de lutte contre lacorruption et les infractions financières etfiscales”), which now employs about onehundred highly specialised public officials.

ProsecutionsEnforcement activity for corruptionoffences remains limited in France, andno French company has beensuccessfully convicted in France inrelation to foreign bribery. This is despite

the fact that French companies havebeen pursued outside France: forexample, in 2013 Total agreed to payaround USD 398 million to U.S.authorities, as part of a settlement whichalso involved a compliance monitor forthree years, in relation to chargesconnected with violations of the ForeignCorrupt Practices Act (FCPA) in Iran.

In a recent case, Safran, a Frenchcompany, and two of its executives wereprosecuted on charges of having bribedNigerian public officials in order to secure asupply contract. The Paris Criminal court(le Tribunal correctionnel) initially foundSafran guilty and imposed a EUR 500,000fine (while acquitting the executives), on5 September 2012. However, on7 January 2015, the Paris Court of Appealdeclared that the offence of active briberywas insufficiently grounded and reversedthe first instance decision, exonerating allthe concerned parties.

In reaction, Eliane Houlette (the FinancialProsecutor, see below) declared, on18 January 2015, that “the rules on thecriminal liability of legal persons are nolonger appropriate for the way in whichlarge international corporations operate.Case law must evolve to address this.”2

France has been recently criticized by theOECD for the very low number ofprosecutions in this area (see below).

New Financial ProsecutorLaw n°2013-1115 dated 6 December2013 created the new office of FinancialProsecutor, and Mrs Eliane Houlette, wasappointed to the post in January 2014.Mrs Houlette has been very active sinceher appointment and there has been

significant enforcement activity inrelation to financial institutions (inparticular, banks), with several recentprosecutions of major financialinstitutions for money laundering andtax fraud. In a parallel development,judges have demonstrated theirwillingness to impose much higherpenalties on companies than in thepast, when one major financialinstitution was required to make apayment of EUR 1.1 billion, before anyjudgment was issued on the merits,which is unprecedented in France.

OECD report In her address on 2 December 2014 tothe OECD ministerial conference,Mrs Christiane Taubira, the FrenchMinister of Justice, reaffirmed France’scommitments to confront corruption.

The OECD’s report on France inOctober 20123 had heavily criticized thefact that only 33 proceedings had beeninitiated and only five sentencesimposed since France signed the OECDConvention on Combating Bribery ofForeign Public Officials in InternationalBusiness Transactions in 2000. TheOECD Working Group on Bribery calledupon France to intensify its actions andto implement measures in order tocombat corruption of foreign publicofficials and bribery, formulatingrecommendations. In a follow-up reportpublished on 19 December 2014, theOECD Working Group commendedseveral significant reforms implementedby France, but concluded that Franceneeded to take further steps in order tocomply fully with the OECD Convention.The Working Group asked France tocontinue its actions regarding the

France

2 Eliane Houlette was reported in ‘Le Monde’ on 18 January 2015 as saying: “Les règles de responsabilité de la personne morale ne sont plus adaptées au fonctionnementdes grands groupes. Il faut que la jurisprudence les fasse évoluer.”

3 http://www.oecd.org/daf/anti-bribery/Francephase3reportEN.pdf.

http://www.oecd.org/daf/anti-bribery/Francephase3reportEN.pdf

prosecution of corruption of foreignpublic officials. According to the 2014report, 24 new proceedings wereinitiated since October 2012.

The French Ministry of Justice said thatmeasures already initiated had proved asuccess as the number of investigationsinitiated regarding corruption hadincreased by 75% in two years4.

Guidelines to strengthen thefight against corruption inbusiness transactionsOn 14 April 2015, the Central CorruptionPrevention Department (Service centralde prevention de la corruption), an inter-ministerial service attached to theMinistry of Justice, released guidelines tostrengthen the fight against corruption inbusiness transactions. These guidelines,which are not binding, revolve around sixmain principles such as theimplementation of an anti-corruptioncompliance program, a sanctions policyand the preparation of an operationalrisk mapping.

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4 Press release published by the Ministry of Justice on 2 December 2014.



Changes to legislationThere were recent changes in Germancriminal anti-corruption legislation andthere are a number of further current draftlaws in this regard.

Expansion of the criminal offence ofbribing delegatesAs from 1 September 2014, section 108eGerman Criminal Code (Strafgesetzbuch)has been amended to make bribery of(and by) German delegates a criminaloffence, punishable with imprisonment ofup to five years or a pecuniary fine. Underthe previous legislation, giving bribes toGerman delegates and members of theEuropean Parliament was, in principle,only subject to criminal liability inconnection with buying or selling votes.This gap in German anti-corruptionlegislation had been identified, inparticular, by the German Federal Court ofJustice (Bundesgerichtshof) in theso-called “Wuppertal corruption scandal

5”.

In that case, the court held that municipaldelegates were not “public officials” for thepurposes of German criminal anti-corruption offences under sections 331 etseqq. German Criminal Code, unlessentrusted with administrative tasks goingbeyond their mandate.

Furthermore, the new law provides for theinclusion of the offence of bribery of (andby) delegates (section 108e GermanCriminal Code [as amended]) on the listof predicate offences for moneylaundering (section 261 GermanCriminal Code).6

Draft law for further strengthening ofGerman criminal anti-corruption lawThere is also a current draft law on fightingcorruption, which would expand the scopeof the commercial bribery offence to acts

beyond competition, include this offenceon the list of predicate offences for moneylaundering (section 261 German CriminalCode) and extend the jurisdictional reachof German courts in respect of bribery ofpublic officials:

n Under the current legislation, criminalliability for taking and giving bribes incommercial practice (Bestechlichkeitund Bestechung im geschäftlichenVerkehr) (section 299 GermanCriminal Code) requires(in accordance with the “competitionmodel” [Wettbewerbsmodell]) that theoffender (as “receiver”) demands,allows himself to be promised oraccepts, or that he (as “donor”)offers, promises or grants a benefitfor himself or a third person in abusiness transaction in return for anunfair advantage in competition. Inthe future, according to the draft law,the criminal offence will also cover(according to the “employer model”[Geschäftsherrenmodell]) benefitsgiven to an employee or an agent ofa company – on the basis of anagreement of wrongdoing(Unrechtsvereinbarung) – in abusiness transaction in return for abreach of duty to this company. Inaccordance with the explanatorynotes to the Act, relevant duties tocompanies can arise from law orcontract. However, an actual breachof duty will not be required (in thesame way as no actual unfairadvantage in competition is requiredunder the current version ofsection 299 German Criminal Code).

n The draft law also proposes that thecriminal offence of taking and givingbribes in commercial practice beincluded as a predicate offence for

money laundering (section 261German Criminal Code), whencommitted on a commercial basis(gewerbsmäßig) or as a member of agang (bandenmäßig).

n The draft law would also amend theGerman Criminal Code provisions oncorruption for the inclusion of“European public officials”(“Europäische Amtsträger”) in additionto “public officials” (“Amtsträger”)(in the current text). A definition of theterm “European public official” willalso be included. These changesintend to transfer to the GermanCriminal Code the relevant provisionsof the EU Anti-Corruption Act(Europäisches Bestechungsgesetz, orEUBestG) regarding the equivalenceof public officials of other memberstates of the European Union andpublic officials “under German law”.However, the proposed changes gobeyond the EUBestG as they wouldnot only apply to the qualified criminaloffences of granting and acceptingbribes (sections 332 and 334 GermanCriminal Code), but also to the basiccriminal offences of granting andaccepting (illegal) benefits(sections 331 and 333 GermanCriminal Code). These basic criminaloffences only require that a “benefit”be granted to or accepted by a publicofficial without approval by theauthority. The qualified offencesrequire, in addition, that the benefit begranted or accepted on the basis ofan – expressed or implied –agreement of wrongdoing(Unrechtsvereinbarung) that the publicofficial, in return, performed, or will inthe future perform, an official act andthereby violated, or will violate, hisofficial duties.

Germany

5 In its judgement dated 9 May 2006, file reference 5 StR 453/15. 6 For further details, please refer to our client briefing: http://www.cliffordchance.com/briefings/2014/10/new_developmentsingermancrimina.html.

http://www.cliffordchance.com/briefings/2014/10/new_developmentsingermancrimina.html

n Finally, the draft law provides for anequivalence arrangement for “foreignand international public officials”under a new section 335a GermanCriminal Code. According to this newprovision, certain public officials offoreign states and internationalorganisations would be treated aspublic officials under German law forcriminal offences committed in publicoffices, if the offence concerns afuture official act. The plannedchanges aim at transferring thecurrent equivalence arrangements ofthe International Anti-Corruption Act(Internationales Bestechungsgesetz,or IntBestG) into the German CriminalCode. However, these proposed newregulations exceed the IntBestG aswell, in that they would apply not onlyto the criminal offence of grantingbribes, but also to the criminal offenceof accepting bribes.7

Draft law on fighting corruption in thehealthcare sectorIn early 2015, both the German Ministryof Justice and the federal state of Bavariapresented draft laws on fightingcorruption in the healthcare sector,particularly aiming at the implementationof a new criminal offence of taking andgiving bribes in the healthcare sector(Bestechlichkeit und Bestechung imGesundheitswesen) in section 299aGerman Criminal Code. The backgroundto these draft laws is a decision of theGerman Federal Court of Justice(Bundesgerichtshof) dated 29 March20128, in which the court had found thatcontract doctors in private practice(niedergelassene Vertragsärzte) wereneither “public officials” nor “agents” (forthe purposes of section 299 GermanCriminal Code). According to this case

law, illegal benefits granted to contractdoctors in private practice in order toinfluence their behaviour are currently notprohibited under section 299 GermanCriminal Code (bribery in commercialpractice), nor as granting (illegal) benefitsor bribes (sections 331 et seqq. GermanCriminal Code) under German criminalanti-corruption law. The relevant draftlaws aim at eliminating this disparity. Theexplanatory notes emphasise the risks ofimproper collusion between, amongstothers, contract doctors in privatepractice and pharmaceutical companiesarising from the fact that medicalprofessionals are, with some exceptions,the exclusive providers of medicaltreatment and various medical productsare only available to the customer on amedical prescription.

New law amending the Act governingFederal Ministers and the Actgoverning the legal status ofParliamentary State SecretariesOn 2 July 2015, the German FederalParliament (Bundestag) passed a new lawamending the Act governing FederalMinisters (Bundesministergesetz) and theAct governing the Legal Status ofParliamentary State Secretaries(Gesetzes über die Rechtsverhältnisse derParlamentarischen Staatssekretäre), theso-called “Waiting Period Act”(Karenzzeitgesetz). This requires currentand former Federal Ministers andParliamentary State Secretaries to notifythe Federal Government in writing if theyintend to take up employment outside thepublic sector, and enable the FederalGovernment to prohibit such employmentwithin a period of up to 18 months fromleaving public office if there are groundsfor believing that such employment couldhave a negative effect on the public

interest. A negative effect on the publicinterest will be assumed if the intendedemployment (i) relates to matters or areasin which the former Federal Minister orParliamentary State Secretary was activeduring his mandate, or (ii) may harmpublic confidence in the integrity of theFederal Government.

The new law follows recent moves bytop-ranking politicians to the privatesector, which were criticised byopposition politicians and byTransparency International (TI). TI hadcalled for a waiting period of three yearswhere there was a connection betweenthe present or former activities and theintended future activities. A Germanprosecution authority had initiatedcriminal investigation proceedings againstone individual on charges of acceptingand granting (illegal) benefits, but theseinvestigation proceedings were recentlydiscontinued (see below).

Draft law on protection ofwhistleblowersThere is also a current draft law topromote transparency and the protectionagainst discrimination of whistleblowers(Whistleblower-Schutzgesetz). Thisproposes changes to German labour lawand civil service law, providing variousprivileges to whistleblowers. Specifically,employees would have the right to reportviolations of legal obligations inconnection with the employer’s businessactivities to external authorities or, undercertain conditions, to the public, andwould be protected against beingpenalised for doing so. In certaincircumstances whistleblowers would alsohave immunity from prosecution inrespect of various offences of theGerman Criminal Code (disclosure of



7 For further details, please refer to our client briefing: http://www.cliffordchance.com/briefings/2014/10/new_developmentsingermancrimina.html. 8 File reference: GrS – St 57/202.

http://www.cliffordchance.com/briefings/2014/10/new_developmentsingermancrimina.html



state secrets [section 97], breach ofofficial secrets and special duties ofconfidentiality [section 353] and abuse oftrust in the foreign service[section 353a]).

Call for a nation-wide centralcorruption registryBoth the German conference of theMinisters of Justice(Justizministerkonferenz) and the Germanconference of the Ministers of Economics(Wirtschaftsministerkonferenz) recentlyrequested the German FederalGovernment to establish a nation-widecentral corruption registry to fight corruptand illegal business practices and tofacilitate fair competition. Companies thathad engaged in corrupt activities wouldbe listed on this register and could beexcluded from public procurementcontracts. Under current law, such non-public registries only exist in nine ofGermany’s 16 Federal States(Bundesländer), including Hesse, NorthRhine-Westphalia, Bavaria, Berlin andHamburg. Such registries are the subjectof some controversy, partly becausecompanies may be listed for offencesother than corruption, and also becausea final conviction may not be required forlisting. A number of registries includecompanies as soon as investigationproceedings are commenced or evenwhere investigation proceedings haveended without a conviction, which hasbeen criticized by some as being contraryto the presumption of innocence.

ProsecutionsSeveral investigation and courtproceedings have caught the attention ofthe media.

In August 2014, Formula 1 ManagingDirector Bernie Ecclestone agreed to payUSD 100 million in order to discontinuecourt proceedings before the MunichRegional Court relating to allegedgranting bribes (Bestechung) (and othercharges) in connection with the sale ofBayerische Landesbank’s Formula 1investment to a finance investor in 2006.According to the prosecution, BernieEcclestone allegedly paid USD 45 millionto an investment banker of BayerischeLandesbank, Gerhard Gribkowsky, whowas sentenced to imprisonment of eightand a half years for accepting bribes(Bestechlichkeit) in separate courtproceedings in 2012, following acomprehensive confession. With thediscontinuance payment ofUSD 100 million, the amount of which isunprecedented in German criminalprocedure, Bernie Ecclestone benefitedfrom section 153a German CriminalProcedure Code. This provision allows forthe discontinuance of criminalinvestigation or court proceedings if,amongst others, such discontinuancepayment is suitable to eliminate the publicinterest in criminal prosecution and if thedegree of guilt does not present anobstacle, while the presumption ofinnocence remains.

In February 2015, the Berlin prosecutionauthority discontinued investigationproceedings against a formerParliamentary State Secretary and theCEO of a major German carmanufacturing company in connectionwith allegations of granting and accepting(illegal) benefits (sections 331 and 333German Criminal Code) due to a lack ofsuspicion. The prosecution authority hadconducted its relevant investigationproceedings as from November 2013

after the former Parliamentary StateSecretary had taken up a new position asthe head of external affairs with thecar manufacturer.

In December 2014, the Neuruppinprosecution authority commenced aninvestigation into alleged corruptionoffences in connection with theconstruction of the new Berlin city airport.In May 2015, the prosecution authorityannounced that it was investigating fourmanagers of a Dutch constructioncompany. An airport manager has beentaken into pre-trial custody after havingreportedly confessed to receiving a cashpayment of EUR 150,000 in return forapproving the payment of invoices by theDutch construction companyamounting to EUR 65 million withoutfurther verification.

Enforcement trendsAs a general trend, corruptioninvestigation proceedings no longer focusmainly on industrial companies (as in thelast decade) but extend also to thefinancial sector. There have been severalinvestigation proceedings by Germanprosecution authorities into banks andfinancial institutions conducting businessin Germany, particularly regarding allegedgranting of (illegal) benefits to Germanpublic officials in the form of gifts andhospitality. German legislation is quitestrict in this regard, and Germanprosecution authorities and courts alsoapply strict standards when applying thisregime. This is particularly true when itcomes to value thresholds for gifts andentertainment granted to public officials,which are low compared tointernational standards.

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Changes to LegislationThe Prime Minister, Matteo Renzi, isreported to be personally supportingreforms to anti-corruption laws that wouldincrease the penalties for corruption andextend the period within which corruptioncharges could be brought. Legislativeproposals approved by the Italian Senateon 1 April 2015 would, if passed,increase the sentence for corruption of apublic official from four to ten years, to sixto 12 years. The ban on tendering forpublic contracts would also increase fromthree to five years. The proposals wouldmean that charges for corruption couldbe brought within 15 years, and it will nolonger be possible to obtain a pleabargain for corruption offences. The shortperiod of limitation for corruption offenceshad been criticised by the OECD as“inadequate” and “of particular concern”9.

The proposals also include measures totighten rules against false accounting andmoney laundering, to enable prosecutorsto confiscate assets where the defendantcannot show a legal origin, and toprovide incentives for whistleblowers interms of reduction of applicable penalties.The legislation will now pass to Italy’sChamber of Deputies.

ProsecutionsPolitical corruption has dominatedheadlines in Italy since May 2014, whenseven managers and ex-members ofparliament were arrested for allegedattempts to influence public tendersconnected with Milan’s Expo 2015 tradefair. The Cabinet has since appointed aspecial commissioner to oversee allgovernment contracts relating to theMilan Expo of 2015.

The Prosecution Service has stepped upenforcement action generally, and furtherprosecutions are anticipated followingimplementation of the reform measures.

The Financial Guard2014 reportThe Financial Guard, an Italian lawenforcement agency under the authorityof the Minister of Economy and Finance,published its 2014 annual report on8 April 2015, saying they have reported3,700 people for crimes against publicadministration. According to the report,one out of every three public contractshad irregularities, and out of the USD5 billion worth of public contracts lastyear, about USD 1.62 billion was lost incases of fraud.

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Italy


9 The OECD’s ‘Follow up to Phase 3 Report and Recommendations’, May 2014, available at: http://www.oecd.org/daf/anti-bribery/ItalyP3WrittenFollowUpReportEN.pdf.

http://www.oecd.org/daf/anti-bribery/ItalyP3WrittenFollowUpReportEN.pdf.



Changes to legislationOn 1 July 2015, a substantialamendment to the Polish Code ofCriminal Procedure will come into force(the Amendment). The Amendment isintended to remodel criminal proceedingsin the direction of a more adversarial trialsystem, as well as to shortenproceedings and to reduce the burdenimposed on judges.

Of particular importance are the changesto the rules regarding the admissibility ofevidence, particularly in respect ofdocumentation commissioned by theparties to the proceedings.

The Amendment will mean that theinitiative in the conduct of evidentiaryproceedings will rest with the parties, andthe court will no longer be obliged toseek evidence. The parties to criminalproceedings will be allowed to submitprivate documents (i.e. statements,letters, notes or expert evidencecommissioned by the parties), to beadmitted as evidence by the court. TheAmendment also introduces a clearprohibition on the admission of evidencegathered illegally (so-called “fruit of thepoisonous tree”).

The admissibility of expert evidencecommissioned by a party to theproceedings is currently unclear. In fact,the reports of such experts are notformally recognized as evidence in anycurrent legislation concerning criminalproceedings. Similarly, such expertreports are not considered as evidence inPolish civil proceedings.

The Amendment expressly permits theadmissibility of expert opinionscommissioned by the parties to thecriminal proceedings. The aim of thischange is to transfer a significant portion

of the burden of conducting theevidentiary proceedings from the court tothe parties themselves.

However, the change may alsohypothetically lead to a “battle ofexperts”, in which the parties will submitcontradictory expert evidence, which inturn may make the criminal proceedingsmore expensive.

The responsibility for assessing any expertevidence will remain with the court.

ProsecutionsPolish enforcement authorities haverecently shown more interest in theenforcement of corporate criminal liability,and it seems probable that the reforms tothe Corporate Liability Act will result in itbeing applied more frequently in future. Inrecent press releases the CentralAnti-Corruption Bureau (the Polishanti-corruption authority) said that in lightof current tender corruption investigationsthey want to make use of provisions inthe Corporate Liability Act on penaltiesand a ban on taking part in publictenders. To this end, the Central Anti-Corruption Bureau is now workingtogether with the Public Prosecutor’sGeneral Office on improving enforcementof the Corporate Liability Act.

In April 2014 police authorities confirmedthat 13 people had been charged inconnection with allegations that doctorswere bribed to promote aGlaxoSmithKline drug dating from 2010 to 2012. Several individualexecutives employed by Novartis pleadedguilty in October 2014 to charges thatthey had given a bribe (in the form of atrip worth more than USD 1,000) inexchange for supporting the sale of aparticular drug. In October 2014, Polishprosecutors said they had charged five

people in relation to contracts given toAlstom Konsal for the delivery of subwaycars and tramways in Warsaw.

Enhanced cooperation byPolish anti-corruptionauthorities with foreignenforcement authoritiesPolish anti-corruption authorities havestarted to co-operate much morefrequently with foreign enforcementauthorities, specifically U.S. agencies(in particular, the U.S. Federal Bureau ofInvestigation, the U.S. Department ofJustice and the U.S. Securities ExchangeCommission). This cooperation betweenenforcement authorities represents atotally new level of cooperation incriminal matters.

On the one hand, Polish authorities areproviding U.S. agencies with findings anddocuments from investigations conductedin Poland and with legal assistance oncriminal matters. There are cases inwhich, based on Polish investigationslimited in scope, the U.S. authorities havestarted conducting substantiallybroader investigations.

On the other hand it is more and morecommon for U.S. enforcement agenciesto provide Polish authorities with supportincluding materials and evidence fromU.S. investigations, based on which thePolish authorities start or expandinvestigations in Poland.

There is also a rapid growth ofcompliance culture in Poland. There aremultiple compliance events andconferences each month. The WarsawStock Exchange promotes compliance inits best practices for listed companies.

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Poland

Changes to legislationA bill has been proposed which wouldamend the Code of Criminal Procedureso that the suspects of non-violentcrimes such as abuse of office, influencepeddling or bribery cannot be taken intopre-trial detention. The bill has received anegative opinion from the Government,but the Human Rights Committee hasissued a positive opinion. Changes arealso proposed to the Criminal Code inconnection with bribery and corruptionoffences. The changes would mean thata person must cooperate with theprosecutors in relation to bribery andinfluence peddling charges within sixmonths in order to avoid criminal liability.There is no time limitation in thecurrent legislation.

ProsecutionsThe National Anti-corruption Directorate(DNA), which focuses on high andmedium level corruption, and the bodywhich is responsible for combatingorganised crime and terrorism (Direcția de

Investigare a Infracțiunilor de Criminalitate

Organizată și Terorism București, orDIICOT) have both published recentreports highlighting the significantincrease in the number of criminal casesinvolving high ranking officials, ministers,politicians and influential businessman(from sectors such as IT, the media,construction and real estate). A numberof judges and prosecutors includingsome from the High Court of Cassation

and Justice (the highest court inRomania) have also been investigatedand/or sent to trial.

DNA reported they have sent to trial12 dignitaries, 330 civil servants,35 magistrate (judges and prosecutors) in2014, and that there had been a numberof convictions of very senior figures,including Romania’s former PrimeMinister, Adrian Nastase, as well as twogovernment Ministers, four Deputies andone Senator. Indeed, the Chief prosecutorof DIICOT was also sent to trial oncorruption charges earlier this year.

Parliamentary immunitycriticisedIn a recent meeting of the EuropeanParliament’s Committee on BudgetaryControl, Romania’s anti-corruption effortswere described as “impressive”, butEuropean Committee Secretary-GeneralCatherine Day stressed the need tocontinue efforts in order to consolidatethe results obtained so far, particularly incombating corruption at lower levels.

At the hearing (attended by DNA ChiefProsecutor Laura Codruta Kovesi andJustice Minister Robert Cazanciuc) it wassuggested that Romanian Members orParliament have been blocking criminalprosecutions of state officials and thatthis practice must be countered byimplementing the Venice Commission’srecommendations on Parliamentary

immunity. The view that Parliament isblocking some criminal investigations isshared by some in Romania. This may bethe result of confusion arising as a resultof the ruling on a pre-trial detentionagainst officials. Nevertheless, given thevery public nature of the criticisms, it islikely that the current approach toparliamentary immunity will be revised.

Furthermore, it has been suggested thatRomania’s fight against corruption hasbeen so intense that, as an unintendedconsequence, it is affecting foreigninvestments as officials seek to avoidapproving projects in case they becomethe next target of the investigators. Theprivate business environment has alsobeen affected as some of the mostsuccessful and influential businessmenfrom various local industries (such asconstruction, IT and the media) areeither investigated or convicted forcorruption related offences.

DNA’s recent “enthusiasm” was criticisedby the former president, Traian Băsescu,who said that overly close cooperationbetween the High Court and the DNA willdestroy public trust in the impartiality ofthe judicial system. A former ministerclose to the former president’s politicalparty has been held in pre-trial detentionfor almost six months, on charges ofcorruption offences including bribery,abuse of influence and money laundering.

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Romania




Changes to legislationWith effect from 1 January 2015, Federallaw No. 273-FZ “On preventingcorruption” (the Anti-Corruption Law) wasamended to prohibit specified individuals,including federal and regionalgovernmental officials, officials of theRussian Central Bank and officers ofpublic corporations and otherstate-owned organisations, from openingor maintaining foreign bank accounts,keeping cash or valuables in foreignbanks or owning foreign financialinstruments. The prohibition does notapply to governmental officialsstationed abroad.

In March 2015, a draft law on the criminalliability of legal entities was submitted tothe Russian State Duma. The draft lawcontemplates (for the first time) theimposition of criminal liability oncompanies and organisations (includingboth Russian and internationalcompanies and organisations) for, interalia, bribery-related offences. This wouldbe a new development becausehistorically, only natural persons can besubject to criminal liability under Russianlaw, while legal entities are insteadsubject to administrative liability. Underthe draft law, penalties for bribery-relatedoffences could include fines, thedeprivation of licences, quotas,preferences or privileges, the deprivationof the right to engage in certain activities,a ban on any activities within the RussianFederation and/or compulsory liquidation.

In February 2015 a draft law on theprotection of persons reporting corruptionoffences was also announced by theMinistry of Labour and Social Protection

of the Russian Federation. At the time ofwriting, the draft law is under the processof review by an independentanti-corruption expert and has not yetbeen submitted to the Russian StateDuma. The draft law is aimed atprotecting persons who report corruptionoffences and encouraging them to comeforward by protecting their confidentiality,protecting them from any unauthoriseddismissal, providing them withmonetary remuneration and/or protectingtheir relatives.

In April 2014 the President signed a decree“On the National Anti-Corruption Plan for2014 - 2015” (the Decree). The Decreerequires state authorities to adopt anti-corruption plans, take measures to ensurecompliance with the Anti-Corruption Law,provide for restrictions on receiving gifts,develop guidelines on how officials shoulddisclose their assets and income andreview all anti-corruption measures on anongoing basis.

The Decree also requires the GeneralProsecutor’s Office to take measures toimprove the detection of bribery by legalentities (Article 19.28 of the Code ofAdministrative Offences) and provides forthe Government to submit proposals onextending the list of legal entities that setsout those legal entities whose beneficialowners must be publicly disclosed.

In compliance with the Decree, statebodies have adopted anti-corruptionplans. Specifically, on 31 July 2014, theFederal Anti-monopoly Service of theRussian Federation ordered its officials toreport in future any gifts received inconnection with certain protocol events,

business trips and other official events. Inaddition, on 4 July 2014, ananti-corruption plan was adopted by theFederal Tax Service.

ProsecutionsAccording to publicly availableinformation, 4,845 individuals pleadedguilty in 2014 to giving a bribe and1,760 individuals were convicted forreceiving a bribe.

The initiation of administrativeproceedings against legal entities forbribery-related offences remains limited inRussia. In general, the Russian courtstend to impose administrative liability forbribery only on small and medium-sizedentities. We are not aware of anyadministrative cases in which largecorporations were involved.

Anti-Corruption CouncilAt a meeting of the Presidium of theAnti-Corruption Council on 24 April 2015,the General Prosecutor, Yuri Chaika,presented a report stating, among otherthings, that the amount of money thathas been voluntarily repaid by thoseinvolved in bribery offences in 2014amounted to RUB 2.5 billion (currentlyapproximately EUR 43 million orUSD 47 million), whereas RUB 23.5 billion(currently approximately EUR 410 millionor USD 450 million) remains to becollected. The Minister of Justice,Alexander Konovalov, also declared thatincreasing anti-corruption educationamong citizens is one of the mainobjectives of the National Anti-CorruptionPlan for 2014 to 2015.

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Russia

ProsecutionsIn December 2014, Alstom agreed toplead guilty and pay a USD 772 millionpenalty following an investigation by theU.S. Justice Department into Alstom’salleged bribery scheme in Saudi Arabia,Egypt, Taiwan, Bahamas and Indonesia.Bloomberg reported that Alstom wonseveral billions of dollars worth ofbusiness in Saudi Arabia by making atleast USD 49 million in illegal payments inpart through middlemen. Alstom hasallegedly bribed half a dozen consultantsa decade ago according to prosecutors.It was also reported that Alstom collecteddetails on officials of Saudi ElectricityCompany (SEC) and identified decision-

makers and prepared an “action plan”with comments on officials (“honestreputation”, “known to deal”, etc.).A further charge is that Alstom allegedlypaid USD 4 million in bribes to anexecutive at SEC and a close relative inorder to secure the official’s support fortenders. Alstom also reportedly madeUSD 2.2 million in donations to a US-based Islamic education foundationassociated with the Saudi official.

In relation to the flooding of a certainneighbourhood of Jeddah in 2009 whereresidential buildings had been permittedto be built through bribery, a formermayor and several businessmen were

sentenced to jail (and to pay fines) forbribing the mayor. The former mayor wassentenced to eight years in jail and to paya fine of SAR 1 million (currentlyapproximately EUR 243,000 orUSD 267,000) for accepting a bribe.The businessmen, two of whom wereforeigners (one from Jordan and one fromSyria) received sentences ranging fromone to five years in jail and fines fromSAR 1 million (currently approximatelyEUR 243,000 or USD 267,000) toSAR 100,000 (currently approximatelyEUR 24,300 or USD 26,700).

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Saudi Arabia




Changes to legislationOn 11 March 2015, the SlovakGovernment submitted a draft billamending the Slovak Criminal Code tothe Slovak Parliament. The bill addresses,among other things, shortcomingsidentified in the OECD report (see below).It also broadens the definition of a foreignpublic official, regardless of whether suchperson is acting within or outside ofher/his authorised competence, andseeks to simplify the legal regulation ofsanctions for criminal offences ofcorruption in the cases of foreign publicofficials. The proposed effective date isset as 1 August 2015.

At the end of 2013, the Slovak Ministry ofJustice published a bill on the criminalliability of legal entities. The bill, currentlyat the level of the Slovak Government inthe legislative process, aims to introducedirect criminal liability of legal entities for alimited number of specified criminaloffences (including corruption offences).The proposed effective date is set as1 July 2015; however, it is highly unlikelythat the bill will enter into force at thatdate. It is proposed that legal entitieswould incur criminal liability under similarcircumstances to those under the existingconcept of quasi-criminal liability. The billdoes not provide for any specificdefences in connection with the criminalliability of legal entities. The sanctionswould include fines, the confiscation ofassets or property, being debarred frompublic procurement (for up to ten years),and a ban on economic activities (for upto ten years or for an indefinite periodof time).

Finally, as from 1 January 2015,legislation on measures connected withthe reporting of anti-social behaviour (theSlovak Whistleblower Protection Act) hasbecome effective. The SlovakWhistleblower Protection Act aims tofinancially motivate individuals to reportany anti-social behaviour (includingcriminal offences of corruption) they comeacross in connection with theiremployment, position or office. Theseindividuals will be protected from thepotential negative consequences ofmaking a report in good faith (e.g.termination of their employment contractwithout the prior consent of the locallabour authorities) and will, in certaincircumstances, also be rewarded by theSlovak Ministry of Justice, with a sum ofup to approximately EUR 19,000.

OECD report on anti-briberypublishedIn November 2014, the Organisation forEconomic Co-Operation andDevelopment (OECD) published its latestreport on the compliance of the SlovakRepublic with its obligations under theOECD Convention on Combating Briberyof Foreign Public Officials in InternationalBusiness Transactions10.

The OECD Working Group found that theSlovak Republic has “implemented themajority of Phase 3 recommendations”made in the OECD’s last report on theSlovak Republic in June 2013. Fullyimplemented recommendations includethose that address training andawareness needs for judges, police,prosecutors and tax inspectors; an

increase of the use of proactive steps fordetecting foreign bribery cases by usingvarious sources including mutual legalassistance (MLA) requests by the SlovakRepublic; and taking specific steps toeffectively respond to MLA requests fromother countries.

The OECD also welcomed internal andexternal anti-money laundering training,as well as materials prepared by both theNational Anti-Corruption Unit and theFinancial Intelligence Unit. A newmethodology of detection andinvestigation of corruption and relatedcriminal offences has been applied by theNational Anti-Corruption Unit from1 January 2015.

However, according to the 2014 reportseveral key recommendations remainunimplemented, including a broaderdefinition of a foreign public official and aforeign bribery offence, and theintroduction of full-fledged criminal liabilityof legal entities. As mentioned above,some of these recommendations havebeen addressed in the course of 2015, inparticular by an amendment to the SlovakCriminal Code which was submitted tothe Slovak Parliament in March 2015following more than one year of legislativeproceedings. Similarly, a draft Bill on theliability of legal entities is also in thelegislative process. The 2014 report alsonoted the need for whistleblowerprotection which has already beenaddressed by the new SlovakWhistleblower Protection Act effective asof 1 January 2015 (please see above).

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Slovak Republic

10 Slovak Republic: Follow Up to the Phase 3 Report & Recommendations November 2014, available at: http://www.oecd.org/daf/anti-bribery/Slovak-Republic-Phase-3-Written-Follow-up-Report-EN.pdf.

http://www.oecd.org/daf/anti-bribery/Slovak-Republic-Phase-3-Written-Follow-up-Report-EN.pdf

http://www.oecd.org/daf/anti-bribery/Slovak-Republic-Phase-3-Written-Follow-up-Report-EN.pdf

Changes to legislationOn 1 July 2015, Organic Law 1/2015,amending the Penal Code, will come intoforce, introducing a hugely significantchange to the concept of corporatecriminal liability in Spanish law.

Among the new developmentsannounced in the Preamble is “atechnical improvement in the regulation ofthe criminal liability of legal persons …designed to properly determine thecontent of ‘due control’, the breach ofwhich provides a basis for criminalliability”. This brief announcement fails togive an idea of the magnitude of thelegislative change that this text, whenenacted as a law, will represent in thesphere of the criminal liability of legalpersons. The amendment goes farbeyond properly determining due control,for example, introducing express groundsfor exemption from criminal liability forlegal persons based on demonstratingthat the corporation possesses andeffectively implements a crime preventionor compliance programme.

Under the new law, legal persons will becriminally liable for: (A) offencescommitted in their name or on theirbehalf, for their direct or indirect benefit,by their legal representatives or anypersons acting individually or as membersof a body of the legal person, who areauthorised to take decisions on behalf ofthe legal person and hold powers oforganisation and control within it; and (B)offences committed, in the performanceof corporate activities and on behalf andfor the direct or indirect benefit of thesame, by persons who, while subject tothe authority of the natural personsmentioned in the foregoing paragraph,were able to commit the acts due to aserious breach by the former of the duty

of control of their activities in view of theparticular circumstances of the case.

There is no doubt that the most importantreform is the introduction, for the firsttime, of express grounds for exemptionfrom criminal liability for legal personsbased on the demonstration that thecorporation possesses and effectivelyimplements a crime prevention orcompliance programme.

In the case of offences mentioned in (A)above, the corporate entity will beexempt from criminal liability if it canshow that:

n prior to the commission of theoffence, the management bodyadopted and effectively enforcedorganisation and managementmodels that include suitablemonitoring and control measures toprevent such offences(compliance programmes);

n supervision of the functioning andfulfilment of the prevention modelimplemented has been entrusted to abody of the legal person withindependent powers of initiative andcontrol (appointment of a complianceofficer or of a collegiate compliancebody), although in companies whichare “smaller” (i.e., those authorised tofile abridged profit and loss accounts)this function may be performed by themanagement body; and

n there has not been an omission ordeficient performance of the functionsof monitoring and control on the partof the compliance body.

If these circumstances can only bepartially proven, this may be taken intoaccount for the purposes of mitigatingthe penalty.

The compliance programme must:

(i) identify the circumstances in whichoffences may be committed;

(ii) establish protocols or procedures toaddress the risks identified;

(iii) have appropriate financial controls toprevent the commission of offences;

(iv) impose an obligation to reportpossible risks and breaches to thebody responsible for overseeing thefunctioning of the complianceprogram;

(v) establish a disciplinary system thatduly penalises breaches of theprogramme; and

(vi) include regular review of theprogramme, and revisions to respondto either significant breaches of itsprovisions, or to changes in theorganisation, the control structure orin the activities performed.

In the case of offences referred to in (B),a corporate entity will be exempt fromcriminal liability if, prior to the commissionof the offence, it adopted and effectivelyenforced a system of organisation,management and control appropriate forthe prevention of offences of the kindcommitted, in line with the requirementsset out above.

This approach is directly inspired byItalian Legislative Decree 231/2011, of8 June, and is also broadly similar to theguidelines contained in ‘The Bribery Act2010 Guidance about procedures whichrelevant commercial organizations canput into place to prevent personsassociated with them from bribing’,published by the UK Ministry of Justice inMarch 2011 (which contains the famoussix principles).


Spain




Mitigating factors for criminal liabilityremain unchanged, and include “havingestablished, prior to the start of the oralhearing, efficient measures for theprevention and discovery of theoffences that may be committed in thefuture with the means or under thecover of the legal person”.

In another new development, criminalliability of legal persons has beenextended to state companies that enforcepublic policy or provide services ofgeneral economic interest, although suchcompanies are only subject to thepenalties envisaged in letters a) and g) ofpoint 7 of Article 33 (a fine in the form ofquotas or a proportional fine and judicialintervention to safeguard the rights ofworkers or creditors for the period of time

considered necessary, up to a maximumof five years), unless it is a legal formcreated by its developers, founders,directors or representatives for thepurposes of evading criminal liability.

ProsecutionsAfter years of complete inactivity,enforcement activity for corruptionoffences is currently very high in Spain.A significant number of public officials areinvolved in current corruption cases, andprivate sector company executives havealso been accused of bribery ofpublic officials.

Case like Operation Púnica, involving publicofficials of the Madrid RegionalGovernment, the ERE case in Sevilla,involving the Andalucia Regional

Government and the Gurtel case, involvingpublic officials of the Valencian RegionalGovernment, have attracted widespreadmedia attention. It has also been reportedthat the Central Government Delegate inthe Valencia Region has been arrested foraccepting bribery from a private sectorcompany executive.

OECD report The OECD’s report on Spain inDecember 201211 had heavily criticizedthe legislation in force, claiming that theSpanish law in relation to complianceprogrammes for the exemption ofcriminal liability was confusing; thechanges introduced in the Penal Codeare a consequence of that report.

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11 http://www.oecd.org/daf/anti-bribery/SpainPhase3ReportEn.pdf.

http://www.oecd.org/daf/anti-bribery/SpainPhase3ReportEn.pdf

Changes to legislationAs of 1 January 2015, Dutchfinancial-economic fraud and anti-briberyrules have been amended to extendexisting measures to combat financialand economic crimes. According to theexplanatory notes to the Bill implementingthe amendments, the Public Prosecutor(Openbaar Ministerie) will place greaterfocus, as well as greater resources andcapacity, on the detection andprosecution of financial-economiccrimes, including foreign publicbribery. The following key amendmentswere implemented:

n The maximum fine for legal entities maybe increased up to a maximum of 10%of annual turnover if the maximum fine(EUR 810,000) is not considered anappropriate punishment;

n The maximum penalty for privatesector bribery is doubled to four yearsimprisonment and the maximumpenalty for public sector bribery issix years imprisonment;

n The penalty for public sector bribery isno longer differentiated on the basisof whether a bribe leads to a violationof an official’s public duty or not;

n The criterion for (punishable) privatesector bribery is no longer that thegifts, promises or services received orobtained have not been disclosed tothe relevant employer or principal, but

whether the employee or agent actedin breach of his or her duties (whichcould entail such non-disclosure ofgift, promises or services);

n The maximum punishment for moneylaundering offence is increased fromfour years imprisonment to six yearsimprisonment;

n For many economic crimes (such asacting without a proper licence), themaximum imprisonment is increasedto four years, for example in the caseof repeat offences. For sucheconomic crimes, the scope ofinvestigation methods that can beused is substantially broadened, andthe applicable statute of limitations isextended from six years to 12 years.

ProsecutionsIn the “Klimop” case, one of the biggestreal estate fraud cases in the Netherlands,multiple high-level suspects(former directors of one of the largestDutch real estate developers and apension fund and a civil-law notary) wereprosecuted for siphoning off funds fromtheir employers and paying bribes inrelation to sales of real estate. They wereconvicted by the Court of First Instance.Recently, the Amsterdam Court of Appealconvicted the suspects for forgery ofdocuments, money laundering, activeprivate bribery and participation in acriminal organization. The Court of Appeal

imposed sentences varying between fourto seven years of imprisonment, higherthan those imposed by the Court of FirstInstance. The Court of Appeal blamed thedirectors for grossly breaching the trust oftheir employers and the civil law notary forseverely breaching the trust of its office.

In another recent case, a former memberof the Provincial Executive (GedeputeerdeStaten) of the province of North Hollandwas prosecuted for accepting bribes from(mainly construction) companies thatwished to conduct business with theprovince of North Holland. He wasconvicted of passive public sector bribery,forgery of documents and moneylaundering at first instance and on appeal.The Amsterdam Court of Appealsentenced him to two and a half years ofimprisonment (less than the three years theCourt of First Instance imposed). The Courtof Appeal criticized the former member ofthe Provincial Executive (GedeputeerdeStaten) for severely breaching the trust inpolitical administrators who have anexemplary role.

Dutch Central Bankexamination into corruptionat banksThe fight against corruption has alsobeen high on the agenda of the DutchCentral Bank (De Nederlandsche Bank, orDNB), one of the financial regulators in


The Netherlands




the Netherlands, on the basis that thefinancial stability of banks and thefinancial sector as a whole is jeopardizedby corruption incidents in the form ofbribery or conflicts of interests. DNB, forexample, has performed thematicexaminations into the risk of corruption atbanks and insurers in the past (theregulator often conducts thematicexaminations to gain insight into risks inthe sector). After the examination in2014, DNB published a guide to goodpractices to help banks and insurersfight corruption.

Recently, DNB announced that it willperform an in-depth examination into riskcontrol aimed at preventing corruption atbanks. According to DNB, the goal of theexamination is for banks to gain more

insight into parts of their business,activities and processes that arevulnerable to corruption so that banks –based on such insight – can taketargeted measures to control relevantrisks. According to DNB it has selectedhigh-risk banks and will contact themshortly to announce the examination andagree on practical details.

Dutch government furtherstrengthens approach tofight corruptionIn March 2015, the Dutch governmentinformed Parliament that severalinternational reports (OECD12, GRECO,EU, UN) show that the Dutch efforts onpromoting integrity and fighting corruptionare generally well appreciated. At the

same time these reports indicated thatthe Netherlands can take further steps toimprove its approach and providedrecommendations to that effect. Thegovernment said it was committed toimplementing these recommendationsand intends to further strengthen itsapproach to fight corruption by promotingintegrity and preventing corruption in thepublic and private sector and detectingsignals of corruption. The governmentsaid it would aim to prevent corruption asmuch as possible. If, in spite of preventivemeasures, corruption still takes place, thegovernment will fight it effectively with allavailable resources and instruments, incooperation – where possible – with theprivate sector and civil society.

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12 http://www.oecd.org/daf/anti-bribery/Netherlandsphase3reportEN.pdf.

http://www.oecd.org/daf/anti-bribery/Netherlandsphase3reportEN.pdf



13 http://www.oecd.org/daf/anti-bribery/TurkeyPhase3ReportEN.pdf.

Changes to legislationAnti-corruption provisions of the TurkishCriminal Code (Law No. 5237) (TCC)were amended in 2012, by theintroduction of new definitions forcorruption, embezzlement and briberyoffences, and the extension of theirapplication. These amendments putTurkey in a better position as regardscompliance with Article 1 of the OECDConvention on Combating Bribery ofForeign Public Officials in InternationalBusiness Transactions (the OECDConvention). In addition, the “effectiveremorse” provisions which provideimpunity from bribery charges undercertain conditions were also amendedto exclude their application in the caseof the bribes offered to foreigncivil servants.

In 2013 further amendments to the TCCreduced the penalty for collusivetendering from five to 12 years to three toseven years, and abolished the provisionproviding for an aggravated sanctionwhere collusive tendering causeddamage to a public institution.

In January 2015, the Turkish PrimeMinister announced plans to amendvarious laws through a legislativepackage named the ‘’TransparencyPackage’’. According to the PrimeMinister’s announcement, this packagewill include a more effective wealthdeclaration procedure for civil servants,and measures to encouragewhistle-blowing in relation to suspectedbribery by civil servants (includingenhanced whistleblower protectionagainst any possible retaliation). Turkishmedia reports suggest, however, that

the implementation of the TransparencyPackage may be postponed to afterthe parliamentary elections (held on7 June 2015).

ProsecutionsThere are currently two ongoing foreignbribery investigations in relation to(i) alleged bribes regarding thecommercial development of real estate bya Turkish citizen to a high-ranking officialin a state which is not party to the OECDConvention, and (ii) alleged bribes inorder to win a public procurementcontract by a Turkish citizen to ahigh-ranking civil servant in a state whichis not party to the OECD Convention.

In December 2013, a number ofprominent persons were detained,including the general manager of TürkiyeHalk Bankası A.Ş. (a Turkish state ownedbank) and the sons of three ministers inconnection with an investigation ofalleged corruption which subsequentlyresulted in the resignation of theseministers. The current President of theRepublic at the time still serving as PrimeMinister announced a cabinet reshuffle,appointing new ministers to replace thosewho had resigned. The corruptioninvestigation gave rise to protests allaround Turkey, primarily in Istanbul,Ankara and Izmir. In January 2015, theparliamentary investigation panel decidednot to bring the cases regarding the threeformer ministers and another ministerwho was also accused of corruptionbefore the Supreme Court. On20 January 2015, the Turkish parliamentsimilarly voted against lifting theparliamentary immunity of these formerministers and allowing such cases to be

brought before the Supreme Court,effectively bringing the investigation to astandstill concerning the ministers.

OECD ReportIn October 2014, the OECD published anOECD Report on Implementing the OECDAnti-Bribery Convention in Turkey,13 whichhighlighted Turkey’s improvement in itslegal framework in relation to the foreignbribery offence and its effectivecooperation with the other parties to theOECD Convention in two foreignbribery investigations.

However, the OECD Working Groupissued several recommendations inrelation to effective investigation,detection, prevention and sanctioning offoreign bribery. In this respect, Turkeywas recommended to:

(i) increase efforts to detect, investigateand prosecute foreign bribery actionsincluding the bribery actions againstlegal persons;

(ii) rectify deficiencies in its legalframework for corporate liability;

(iii) increase the current level of sanctionsto legal entities in relation to briberyoffences;

(iv) maintain the independence ofprosecutors and provide an enhancedtraining to law enforcement authoritieson the corporate liability provisions inthe foreign bribery cases; and

(v) provide an enhanced protection towhistleblowers in both the public andprivate sectors.

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Turkey*

*Nothing in this client briefing should be interpreted or construed as legal advice in relation to the laws of Turkey. Turkish law advice is provided based on a co-operationagreement between Clifford Chance and Yegin Ciftci Attorney Partnership.

http://www.oecd.org/daf/anti-bribery/TurkeyPhase3ReportEN.pdf



14 http://www.transparency.org/cpi2014.

Changes in legislationUkraine’s legislative framework forpreventing and fighting corruption hasrecently been amended through theintroduction of new anti-corruption lawsthat became effective on 26 April 2015.These new laws require businesses thatoperate in Ukraine to take additionalmeasures to tackle corruption.

The key changes introduced include:

Obligation to implement an Anti-Corruption Compliance ProgrammeEach Ukrainian or foreign companybidding for public procurement contractsin Ukraine is now required to adopt ananti-corruption compliance programmethat complies with the guidelines set outby law in Ukraine and to appoint acompliance officer. Failure to implementsuch an anti-corruption complianceprogramme will preclude companies fromparticipation in the bidding process.

The same requirement also applies toUkrainian companies that are 50% or morestate or municipally owned (and satisfy anumber of additional criteria relevant totheir head-count and gross revenue).

Obligation to disclose BeneficialOwnersA Ukrainian company must disclose tothe public its ultimate beneficial owners,being any individuals who (i) alone ortogether with others, own, directly orindirectly, 25% or more of the sharecapital or voting rights in the company; or(ii) irrespective of the formal ownership,have decisive influence on managementand decision-making in the company.

All existing Ukrainian companies mustprovide this information about theirultimate beneficial owners or theirabsence to the state registrar by25 September 2015. The process ofreporting is now actively under way.

Increased limits on gifts to PublicOfficialsStatutory limits on gifts to Ukrainianpublic officials have been revised. Themaximum allowed value of each individualgift must not exceed the equivalent ofone minimum monthly salary in Ukraineon the day the gift is given (currentlyapproximately EUR 52 or USD 57) andthe cumulative value of all gifts receivedfrom one source during a year must notexceed the equivalent of two living wagesestablished in Ukraine as at the mostrecent 1 January (currently approximatelyEUR 104 or USD 114).

ProsecutionsUkraine has recently launched a substantialanti-corruption prosecution effort againstformer and present public officials. On25 March 2015, at the meeting of theCabinet of Ministers of Ukraine the policearrested Serhiy Bochkovsky, former headof Ukraine’s State Emergency Service, andhis former first deputy Vasyl Stoyetskyi forthe alleged embezzlement of public fundswhen administering public procurementprocedures. Earlier in the month, at therequest of the Ukrainian police authorities,the Spanish authorities arrested YuriyKolobov, Ukraine’s former Minister ofFinance. Mr. Kolobov is reported to besuspected of misappropriating substantialamounts of public funds. Currently,Ukrainian enforcement agencies arecarrying out pre-trial investigations of theabovementioned cases and the courtsproceedings have not yet commenced.

Creation of the Anti-Corruption Bureau ofUkraine and Appointment ofits ChairmanOn 16 April 2015, the President ofUkraine appointed Artem Sytnyk as thechairman of the newly establishedAnti-Corruption Bureau of Ukraine. The

Bureau has been established as aninvestigation office for corruption relatedoffences and forms part of Ukraine’seffort to tackle corruption.

OECD Action Plan On 22 April 2015, Ukraine and the OECDsigned an Action Plan for strengtheningco-operation to tackle corruption,improve public governance and the ruleof law, boost investment and foster adynamic business environment.

In accordance with the Action Plan,Ukraine and the OECD will co-operateinter alia through Ukraine’s activeparticipation in the work of relevantOECD bodies and exchange ofinformation and data.

Ukraine 2015 CorruptionSnapshot by TransparencyInternationalAccording to the Transparency Internationalpress release of 15 April 2015, a jointsurvey “Business corruption perceptionsindex14” held by Transparency InternationalUkraine, Privat Bank Ukraine and PwCUkraine revealed that “the level ofcorruption in state government authoritieshas not changed over the past six monthsand even worsened” in the opinion ofsome 2741 leaders of Ukrainian business.According to the survey, 57.2% ofrespondents stated that the corruption levelin Ukraine in the past six months had notchanged, 27.7% said that the situationbecame worse and 15.1% of respondentsnoted certain improvement. The taxauthorities are noted by the survey asleaders among those mostly involved incorruption related activities.

The survey confirms that corruptionremains an issue for Ukraine and requiresfurther attention of the law enforcementauthorities and sufficient political will tofight corruption.

Ukraine

http://www.transparency.org/cpi2014

There have been media reports15 that theGulf Cooperation Council has approved anew anti-corruption law, the creation of aunified anti-corruption database andlegislation to ensure recovery of fundsderived from corruption. However, furtherinformation is not yet publicly available inthis regard.

In Abu Dhabi, a new taskforce has beencreated within the Abu DhabiAccountability Authority16 tasked withinvestigating financial breaches andcorruption, examining legislation, testingfinancial and administrative systems andensuring accountability.

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United Arab Emirates


15 http://www.gulf-times.com/qatar/178/details/437150/heads-of-gcc-anti-graft-authorities-meet-in-doha.16 http://www.thenational.ae/uae/sheikh-mohammed-bin-zayed-approves-anti-corruption-taskforce.



Changes to legislationFurther to the UK government’s G8commitment in June 2013, legislation hasbeen introduced to increase thetransparency of company ownership. TheSmall Business, Enterprise andEmployment Act 2015, which receivedRoyal Assent on 26 March 2015, amendsthe Companies Act 2006 to requirecompanies to keep a register of peoplewho have significant control over thecompany. It also includes measuresdesigned to remove and prohibit the useof bearer shares, to prohibit corporatedirectors (except in certaincircumstances), to deter opaquearrangements involving directors, and tomake individual controlling directorsmore accountable.

It has been suggested, particularly byDavid Green, Director of the SeriousFraud Office (SFO), that the laws onwhite-collar crime should be amended sothat there would be an offence – similarto the offence in the UK Bribery Act offailing to prevent bribery – of failing toprevent other types of financial crime.While the government has shown someinterest in this proposal, there is noindication that such an offence would beintroduced in the near future, and thegovernment has said that it would not beintroduced without a formal consultation.

Following serious allegations of corruptionby police officers, a new offence of policecorruption has been introduced. TheCriminal Courts and Justice Act 2015,which received Royal Assent on 12February 2015, makes it an offence for apolice constable to exercise the powersand privileges of a constable improperlywhere he knows, or ought to know thatthe exercise is improper (section 26). Forthe purposes of this offence, a police

constable exercises the powers andprivileges of a constable improperly if heexercises, fails to exercise, or threatens toexercise or not to exercise, the powersand privileges of a constable (a) for thepurpose of achieving a benefit for himselfor herself, or a benefit or a detriment foranother person, and (b) a reasonableperson would not expect him or her to doso for the purpose of achieving thatbenefit or detriment. Exercising, or notexercising, the powers and privileges of aconstable include performing, or notperforming, the duties of a constable.

ProsecutionsThere have been only a few cases so farbrought under the UK Bribery Act, butprosecutions continue to be brought underthe Prevention of Corruption Acts 1889-1916, which still apply to conduct thatoccurred before 1 July 2011 (when theBribery Act came into force). In December2014, the SFO announced the firstconviction, after trial, of a company for anoverseas corruption offence (Mabey &Johnson was convicted following a guiltyplea), under the pre-Bribery Act legislation.Smith and Ouzman Ltd, a UK printingcompany specialising in securitydocuments such as ballot papers andpayment vouchers was charged withmaking payments of around GBP 400,000to public officials in Mauritania, Ghana,Somaliland and Kenya, in return forcontracts. Several employees of thecompany were also convicted.

The SFO also achieved its first BriberyAct conviction in December 2014 in acase involving false representations byemployees of the Sustainable GrowthGroup to investors about purported“green biofuel” Jatropha tree plantationsin Cambodia. The bribery charges weresupplementary to the main charges of

fraud and related to payments by a salesagent of unregulated pension andinvestment products to an employee ofone of the group’s subsidiaries inexchange for inflated commissions.

Also in December 2014 a Scottishcompany paid over GBP 170,000following the discovery, during theacquisition process, that some contractsin Kazakhstan had been obtained as aresult of corrupt payments. InternationalTubular Services, which was acquired byParker Drilling Company, reported thediscovery to the Scottish authoritieswhich pursued the money through a civilrecovery order.

The SFO has also brought corruptioncharges against Alstom Network UK Ltdand some of its employees in relation totransport projects in India, Poland, Tunisiaand Hungary and has announced anumber of other investigations.

UK Anti-Corruption PlanThe UK government published a nationalplan for the UK’s anti-corruption efforts on18 December 201417. This seeks to drawtogether the different strands beingpursued by the government to combatcorruption, and includes 66 specific actionpoints. Among the action points are:

n The Cabinet Office will consider, byAugust 2015, what steps are requiredto make information available onsuppliers excluded from publiccontracts, including the feasibility,potential advantages anddisadvantages of a register ofexcluded suppliers.

n The Cabinet Office will also establisha new cross-departmental unit oninternational corruption, providingsupport to the Government Anti-

United Kingdom

17 available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/388894/UKantiCorruptionPlan.pdf.

Corruption Champion, and willarrange a regular forum for civilsociety and business leaders toengage with the government onbribery and corruption issues.

n The Ministry of Justice will examinethe case for a new offence of acorporate failure to prevent economiccrime and the rules on establishingcorporate criminal liability more widely,by June 2015.

n A new central bribery and corruptionunit will be created within the NationalCrime Agency (NCA) by bringingtogether resources from the NCA andanti-corruption units funded by theDepartment for InternationalDevelopment.

n The Home Office is to seek to amendthe Proceeds of Crime Act 2002 toenable the use of investigative powersafter a confiscation order has beenmade, to facilitate the tracing andrecover of hidden assets, and also tochange the legal test for a restraintorder, from one of ‘reasonablegrounds’ to one of ‘suspicion’ indomestic and international cases.

n The Department for Business,Industry and Science will seek toimplement a central register of UKcompany beneficial ownershipinformation as soon as practicable.

FCA Guidance onfinancial crimes systemsand controlsIn April 2015, the Financial ConductAuthority (FCA) published its finalisedguidance for firms which are FCAregulated on financial crime controls,including guidance on anti-briberycontrols distilled from earlier thematicreviews. The FCA has fined a number offirms in the past for failing to haveadequate anti-bribery systems andcontrols in place. Its powers in thisrespect are not derived from the BriberyAct, and can be exercised even wherethere is no evidence that briberyhas occurred.18

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18 ‘Financial Crime: a guide for firms’ (FG15/7) can be found on the FCA website at https://fshandbook.info/FS/html/FCA/FC/link/PDF.

The Americas

Changes to legislationThe new anti-corruption lawBrazil has recently provided foradministrative liability for offences ofcorruption through Law 12,846, of1 August 2013 (the Anti-Corruption Law).Prior to its enactment, Brazilian law onlyprovided for criminal liability througharticles 333 and 337-B of the BrazilianCriminal Code. Criminal liability for acts ofcorruption arises from:

n offering or promising an illicit benefit toa Brazilian public official, seeking toencourage such public official toperform, omit or delay an official act; or

n promising, offering or giving, directlyor indirectly, an illicit benefit to aforeign public official or third party,seeking to encourage such official toperform, omit or delay an official actrelated to an internationalcommercial transaction.

Individuals who participate in suchactivities face criminal liability regardlessof whether the public official accepts theillicit benefit. However, if the public officialdoes accept the benefit proposed andperforms, omits or delays an official act,the penalty for the crime will increase bya third. The penalties include a prisonsentence of up to 12 years and/or a fine.

Through the Anti-Corruption Lawadministrative liability may arise if oneengages in the following activities:

n promising, offering, or giving, directlyor indirectly, illicit benefits to a publicofficial (Brazilian or foreign) or to arelated third party;

n financing, paying, sponsoring or inany way subsidising an unlawful act;

n making use of an intermediary,whether a natural person or legalentity, to conceal its real purposes orthe identity of those benefitting fromthe acts of corruption;

n in the context of public bids, engagingin any act intended to defraud or inany way hampering the competitivenature of the bidding procedure; or

n in the context of public contracts,engaging in any act intended todefraud or manipulate a publiccontract, or preventing thesupervision or monitoring by thecompetent authority of the applicationof the contract.

In respect of legal entities accused ofbreaching the Anti-Corruption Law, theprosecution is not required to establishwillful misconduct or gross negligence asthe test is an objective one. The penaltiesinclude: (i) fines ranging of up to 20% ofthe legal entity’s total gross revenue in thefiscal year prior to the administrativeproceedings and (ii) publication of thejudicial decision in major media outlets aswell as the relevant legal entity’s website.

Further changes to legislationOn 19 March 2015, Decree No. 8,420was issued which regulates certainarticles of the Anti-Corruption Law andhas established the following:

n the jurisdiction of the Comptroller-General of the Union (CGU) overinvestigations involving alleged briberyof non-Brazilian public officials;

n a new system for calculating fines;

n a list of criteria to assess theeffectiveness of an entity’s complianceprogramme in the event of aninvestigation, such as the existence ofstandards of conduct, code of ethics,

policies and procedures of integritywhich are applicable to allofficers; and

n further requirements in respect ofleniency agreements, providing that, forexample, leniency agreements mayonly be entered into by the first entity towhistle-blow and such entity must firstconfess to acts of corruption.

ProsecutionsBrazil is currently embroiled in a majorcorruption scandal, code-namedoperation “lava-jato”, launched by theFederal Police in March 2014. Initially amoney laundering investigation, operation“lava-jato” has expanded to coverallegations of corruption at the state-controlled oil company where it is allegedthat executives accepted bribes in returnfor awarding contracts to constructionfirms at inflated prices.

In 2014, 25 individuals were arrested aspart of the investigation and in March2015, the Brazilian Supreme Courtauthorized the investigation of 55politicians from six different politicalparties allegedly involved in the corruptionscheme.

As of 6 May 2015, twelve individuals havebeen convicted and imprisoned, fineshave been levied, and damages awardedagainst a number of implicated parties. Inaddition, the Federal Prosecutors seek torecover a further BRL 4.5 billion (currentlyapproximately EUR 1.3 billion orUSD 1.4 billion) in damages and fines.According to Federal Prosecutors,operation “lava-jato” is the largestcorruption and money launderinginvestigation in Brazilian history.

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Brazil*


*Clifford Chance, like other international law firms, is not licensed to provide Brazilian legal advice and, therefore, nothing in this client briefing should be interpreted orconstrued as legal advice in relation to the laws of Brazil.



Enforcement TrendsU.S. government authorities continuetheir aggressive enforcement of ForeignCorrupt Practices Act (FCPA) violations,which is jointly enforced by the U.S.Securities and Exchange Commission(SEC) and the U.S. Department of Justice(DOJ). Companies listed on U.S.exchanges should be aware that the SECis increasingly focusing on violations ofthe FCPA’s accounting provisions and theadequacy of a registrant’s internalcontrols to prevent such violations. And,recently, the SEC Division of EnforcementDirector, Andrew Ceresney, broadlycautioned U.S. issuers that: “we are veryfocused on internal controls. I think youwill find we are active in this area in thecoming months.”19

The SEC has frequently chargedcompanies engaged in foreign bribery ofgovernment officials with parallelviolations of the accounting provisions,basing its charges on the company’sfailure to establish an appropriate systemof internal controls designed to preventthe bribes at issue. More recently,however, the SEC has been basinginternal controls violation on a broaderfailure of the Company to implement ormaintain anti-corruption compliancesystem that are sufficient to addresscorruption risks – even in the absence ofany charges or findings that improperpayments were made. In short, recentenforcement actions indicate that theSEC’s view is that the mere failure of apublic company to have an adequateanticorruption compliance program mayconstitute a securities law violation.

Internal ControlRequirementsThe FCPA’s accounting provisions applyto companies considered issuers underthe Securities Exchange Act of 1934 (theExchange Act)20 and require issuers toadopt internal controls that ensureaccurate financial records. This generallymeans devising and maintaining a systemof internal accounting controls sufficientto provide reasonable assurances that:

n expenditures have management’sgeneral or specific authorization;

n transactions are recorded inconformity with accounting principlesapplicable to public companies; and

n records are audited regularly toensure existing assets match booksand records

In recent guidance, U.S. authoritiesclarified that adequate internal controlsinclude additional components, such asmaintaining a culture of integrity andethics, designing an effective complianceprogram, conducting risk assessmentsand other control activities over policiesand procedures to ensure they arecarried out as designed, and monitoringthe foregoing.21

Lessons from InternalControl EnforcementActionsRecent enforcement actions demonstratehow the SEC has relied on the FCPAaccounting provisions to regulate conductoutside of the traditional anti-bribery realm.

In a noteworthy 2012 case widelyperceived as a departure from precedent,the SEC pursued internal controlscharges against Oracle where it could notfind sufficient evidence to charge aviolation of the FCPA’s anti-briberyprohibitions.22 The SEC alleged thatemployees of Oracle’s wholly-ownedIndian subsidiary established side fundsto “park” proceeds of sales to the Indiangovernment. These side funds were thenallegedly used by Oracle’s distributors topay third parties for marketing anddevelopment expenses. When it broughtcharges, against Oracle, the SEC did notallege, however, that the distributors usedthese side funds to make improperpayments. Instead, the SEC alleged thatOracle “failed to devise and maintain asystem of internal accounting controlssufficient to provide reasonableassurances that: (i) transactions wereexecuted in accordance withmanagement’s general or specificauthorization; and (ii) transactions wererecorded as necessary to permit thepreparation of financial statements inconformity with generally acceptedaccounting principles or any other criteriaapplicable to such statements, and tomaintain accountability for its assets.”The Oracle complaint thus signaled thatcertain company practices may create arisk that company “funds potentially couldbe used for illicit means, such as briberyor embezzlement”23 – and thus give riseto an internal controls violation – even inthe absence of a bribery finding.

In the wake of Oracle, the SEC hassubsequently charged several companies

United States of America

19 See SEC to look closer at internal control violations, by Hazel Bradford, 12 March 2015, available at www.pionlinearticle.com.20 This includes issuers that have a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or that is required to file annual or other

periodic reports pursuant to Section 15(d) of the Securities Exchange Act of 1934 (see Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-2213, Sec. 102, 91 Stat.1494 (1977)). This also includes foreign private issuers with American Depository Receipts listed on U.S. exchanges.

21 U.S. Dep’t of Justice and U.S. Securities and Exchange Commission, A Resource Guide to the U.S. Foreign Corrupt Practices Act (2012), at 40, available athttp://www.justice.gov/criminal/fraud/fcpa/guide.pdf.

22 In the Matter of NATCO Group, Securities and Exchange Act of 1934 Release No. 61325, 11 January 2010.23 SEC v. Oracle Corp., No. 3:12-cv-04310 (N.D. Cal. 13 August 2012), ¶ 13 (emphasis added).

with internal controls violations withoutpursuing attendant anti-bribery chargesand without such charges being pursuedby the DOJ in a parallel criminal FCPAanti-bribery action.24 In 2013, the SECcharged Stryker, a medical devicescompany, with internal controls violationsfor incorrectly recording USD 2.2 millionin illicit payments to foreign governmentofficials. According to the SEC, “even acursory review of the underlyingdocumentation, such as travelauthorization forms and itineraries, wouldhave revealed the illegitimate nature ofthe payments.”25 A year later, the SECcharged Bruker, another medical devicescompany, for internal controls violationsfor failure to implement an FCPAcompliance and training program at itsChinese offices and for failing to put inplace adequate controls to address the“risks of doing business in China” and“the risks of businesses that soldprimarily to SOEs.”26

The SEC has also recently pursuedinternal controls charges for inaccurateaccounting of payments beyond thosecovered by the FCPA. In February 2015,the SEC charged Goodyear Tire &Rubber Co. with books and records and

internal controls violations withoutpursuing charges under anti-briberyprovisions. In addition to citing violationsdue to Goodyear’s African subsidiaries’payments to foreign government officials,the SEC also alleged violations forimproper recording of commercialpayments made to “private companies, toobtain business,” which are not subjectto the FCPA.27 Thus public companies,like Goodyear, should be aware that theaccounting provisions can be appliedmore broadly than to conduct giving riseto violations of the improper paymentprovisions of the FCPA.

As this enforcement activitydemonstrates, the language of FCPA isnot self-limiting, and does not restrictenforcement of the FCPA’s accountingprovisions to conduct probative of orrelated to bribery. U.S. issuers shouldthus heed the advice given by DirectorCeresney in another March 2015 speechto “place strong emphasis on theimportance of designing andimplementing strong controls. (...)[a]ppropriate resources and attention alsoneed to be devoted to monitoring thosecontrols for effectiveness and makingchanges as needed.”28 Such issuers

should also conduct periodicassessments of their internal controls tomake sure that they are sufficientlytargeted to address anticorruptioncompliance risks and take prompt actionto remediate any deficiencies.

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24 See e.g. In the Matter of Allianz SE, Securities and Exchange Act of 1934 Release No. 68448, 17 December 2012; In the Matter of Stryker Corporation, Securities andExchange Act of 1934 Release No. 68448, October 24, 2013; In the Matter of Bruker Corporation, Securities and Exchange Act of 1934 Release No. 73835, December15, 2014. The DOJ has exclusive jurisdiction over criminal enforcement of the FCPA.

25 See In the Matter of Stryker.26 See In the Matter of Bruker.27 In the Matter of Goodyear Tire and Rubber Company, Securities and Exchange Act of 1934 Release No. 74356, 24 February 2015.28 SEC Speech, “FCPA, Disclosure, and Internal Controls Issues Arising in the Pharmaceutical Industry,” SEC Division of Enforcement Director Andrew Ceresney, Remarks,

CBI’s Pharmaceutical Compliance Congress, 3 March 2015.

Asia Pacific

Changes to legislationOn 19 March 2015 the Australian Ministerfor Justice, The Hon Michael Keenan MP,presented a Bill to the House ofRepresentatives which seeks to amend thecurrent criminal offence of bribing a foreignpublic official. The Crimes LegislationAmendment (Powers, Offences and OtherMeasures) Bill 2015 would amend Division70 of the Criminal Code Act 1995(Commonwealth) by specifying that theredoes not need to be an intention toinfluence a particular foreign public official,and that business, or a businessadvantage, does not need to be actuallyobtained or retained.

There has been no progress, however, onthe Federal Government’s plans in relationto facilitation payments. Although thegovernment published consultativeproposals in November 2011 on removingthe exception in Australian law forfacilitation payments, no formalannouncement has yet been made.

The investigative powers of the AustralianFederal Police (AFP) and various otherenforcement agencies including theAustralian Securities and InvestmentsCommission (ASIC) have been bolstered bythe introduction of the Telecommunications(Interception and Access) Amendment(Data Retention) Act 2014 which requirestelecommunications providers to retain adefined set of metadata for a period of twoyears, substantially improving the availabilityof data for their investigations.

ProsecutionsIn February 2015, the AFP launchedAustralia’s second foreign briberyprosecution against three directors of aSydney-based construction company whoare alleged to have attempted to bribe Iraqigovernment officials in order to secureconstruction contracts in Iraq.

The first Australian prosecution occurred in2011 when two Australian companies,Securency International Pty Ltd and Note

Printing Australia Ltd, were charged withconspiracy to bribe foreign public officialsunder the anti bribery provisions of theCommonwealth Criminal Code. The AFPcommissioner was reported as saying thatit was pursuing 14 active briberyinvestigations, of which 13 had foreignbribery as a primary offence.

OECD report on anti-briberypublishedThe Organisation for Economic Co-Operation and Development (OECD) hasjust published its latest report on Australia’scompliance with its obligations under theOECD Convention on Combating Briberyof Foreign Public Officials in InternationalBusiness Transactions (Australia: Follow Upto the Phase 3 Report &Recommendations April 2015)29.

The OECD Working Group found thatAustralia has made “good progress onaddressing a number of importantrecommendations” made in the OECD’slast report on Australia in October 201230.Positive developments include thatAustralia has reviewed its overall approachto enforcement resulting in theestablishment of a Fraud and Anti-Corruption Centre, which facilitatescoordination between multiple agenciesincluding the AFP, the ASIC and theAustralian Taxation Office. As suggested,the AFP has also created a Foreign BriberyPanel of Experts to review OECDrecommendations and provide training toAFP officers and other relevant agencies.

Whilst welcoming Australia’s adoption ofpublic sector whistleblower protection, theOECD Working Group has recommendedsimilar protections are introduced for theprivate sector. The Working group alsonotes that Australia has yet to put in placetransparent debarment policies forprocuring agencies and that Australia hastaken no action in relation to amending therecord keeping requirements for facilitation

payments (which remain inconsistentbetween criminal and tax legislation). TheOECD also recommended that Australiapursues investigations into false accountingmore vigorously.

Following criticism in 2012 of Australia’slow prosecution rate, the 2015 reportnoted that 15 new foreign briberyallegations have surfaced since its previousreport and that the number of foreignbribery investigations has increased to 17(from 7 in October 2012). Some of thesehave received significant media attentionsuch as the AFP’s investigation intoLeighton Holdings Ltd. After beingcriticised for failing to investigate corporateoffences arising from the allegations againstLeighton Holdings, ASIC has sinceannounced it is conducting a formalinvestigation to probe company executivesusing its compulsory powers to determineif there has been any contravention of theCorporations Act 200131.

In addition to the increase in investigations,the 2015 OECD Report also noted thegovernment’s proposed changes to theoffence of bribing a foreign official (seeabove) and the fact that the facilitationpayment defence is under activeconsideration.

Call for Senate inquiryFurther evidence of the current impetusto address foreign bribery is the recentannouncement by an Australian Senatorthat he will be moving for a Senateinquiry into foreign corrupt practices,the practice of facilitation payments toforeign public officials and the role ofthe AFP and other agencies to properlyinvestigate these matters. A number oflarge Australian companies named inthe context of the proposed inquiryinclude Leighton Holdings.

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Australia


29 http://www.oecd.org/daf/anti-bribery/Australia-Phase-3-Follow-up-Report-ENG.pdf.30 http://www.oecd.org/daf/anti-bribery/Australiaphase3reportEN.pdf.31 http://www.comlaw.gov.au/Details/C2015C00228.

http://www.comlaw.gov.au/Details/C2015C00228

http://www.oecd.org/daf/anti-bribery/Australiaphase3reportEN.pdf

http://www.oecd.org/daf/anti-bribery/Australia-Phase-3-Follow-up-Report-ENG.pdf



ProsecutionsThere have been a number of highprofile corruption prosecutions in recentmonths. In its 6 August 2014 decisionof HKSAR v Lionel John Krieger ([2014]HKEC 1323), the Hong Kong Court ofFinal Appeal (CFA) confirmed that HongKong’s much feted anti-graft laws donot apply to conspiracies made in HongKong to offer bribes abroad, whether toforeign public officials or privatecorporations32. This is the case even ifthe bribes result in a benefit to a HongKong company. The CFA upheld a lowercourt’s decision to set aside theconvictions of two executives forconspiracy to offer bribes to agovernment official in violation of section9(2) of the Prevention of BriberyOrdinance. Because the partiesconspired in Hong Kong but the bribeswere offered by an agent in Macau, theCFA agreed that Hong Kong did nothave jurisdiction over the crime. Thishas highlighted a weakness in HongKong’s anti-corruption laws, in starkcontrast to the wide reaching extra-territorial effect of the U.S. ForeignCorrupt Practices Act and the UKBribery Act.

The former co-chairman of Sun HungKai Properties Ltd, Thomas Kwok, wassentenced to five years imprisonmenton 23 December 2014 following hisconviction for conspiracy to commitmisconduct in public office. The offencerelated to payments totallingHKD 19.682 million (currentlyapproximately EUR 2.3 million orUSD 2.5 million) to Rafael Huiimmediately before Hui took office asthe Chief Secretary of Hong Kong. Huialso received a seven and a half yearprison sentence. Sun Hung KaiProperties Ltd is one of the world’slargest real estate groups with a marketcapitalisation of over HKD 381 billion

(currently approximately EUR 45 millionor USD 49 million) (as at early May2015). In March 2015, the Hong KongCourt of Appeal rejected an applicationby Thomas Kwok for bail pendingappeal as it was not persuaded that thegrounds of appeal advanced had anyreal chance of success. It will beinteresting to see if the result of thishigh-profile case will strengthen andembolden the Independent CommissionAgainst Corruption (ICAC) in futurebribery investigations.

On 9 December 2013, a former seniorbanker of a German financial institutionwas sentenced to seven years ofimprisonment for accepting up toHKD 28.4 million (currentlyapproximately EUR 3.4 million orUSD 3.7 million) in illegal bribes. Thesebribes were accepted in return forproviding investment advice without therequisite approval from the financialinstitution. The defendant was alsoordered to pay HKD 28.4 million inrestitution to the financial institution.

On 4 March 2015, Zhang Guoqiang, aformer consultant to Sinopec (HongKong) Ltd, a unit of Sinopec Corp, wassentenced to seven months in prison foraccepting HKD 600,000 (currentlyapproximately EUR 71,000 orUSD 77,400) in bribes.

ICAC InvestigationsOn 9 October 2014, the Secretary forJustice Rimsky Yuen authorised theDirector of Public Prosecutions tohandle a complaint made to the ICACagainst the Chief Executive LeungChun-ying. The complaint relates to aHKD 50 million (currently approximatelyEUR 5.9 million or USD 6,4 million)payment received in 2011 by Leungfrom UGL (an Australian engineeringcompany) as part of a non-compete

agreement. As the payment was madeshortly before Leung took office as ChiefExecutive of Hong Kong, the proprietyof such payment has been questioned.

Other recent high-profile ICACinvestigations include the ongoinginvestigation into former Chief ExecutiveDonald Tsang Yam-kuen (which began in2012), and Jimmy Lai, a Hong Kongmedia tycoon (which began inAugust 2014).

Recent guidelinesFollowing a request by the ICAC, theSecurities and Futures Commission (theindependent regulator of Hong Kongsecurities and futures markets) issued acircular on 13 February 2015. The circularintended to bring to the attention of alllicensed entities a ‘Sample Code ofConduct’ issued by the ICAC which alicensed entity may adopt or makereference to when implementing its internalanti-bribery policy. The ICAC also providescorruption prevention advice to the privatesector upon request and has held thematicseminars for business organisations toequip them with the legal knowledge andskills to prevent corruption.

New appointment ofregulatorsOn 22 December 2014, Maria Tam Wai-chu was appointed as the new chair ofthe ICAC’s operations review committeeand a member of the ICAC’s AdvisoryCommittee on Corruption. These rolescommenced on 1 January 2015. Theappointment has been criticised ascontradictory to ICAC’s neutral politicalstance as an independent regulatorbecause of Tam’s role as a representativeof the National People’s Congress (thelegislature of the PRC).

Hong Kong

32 For further details, please refer to our relevant client briefing: http://www.cliffordchance.com/briefings/2014/08/a_safe_haven_fromwhichtoplanforeignbribes.html

TrendsHong Kong’s anti-corruption lawenforcement has followed theinternational trend in seeing a a shift inemphasis from enforcement againstindividuals to enforcement againstcorporates, e.g in an increasing numberof investigations into corrupt activitiesrelated to the banking industry, such asthe trading of warrants. There is also atrend towards increased cooperationbetween international authorities incombating corruption, particularly withauthorities in the UK and the PRC. Inmore recent times, Hong Kong hasincreased its reliance on regulatorysupervision in preventing corruption.

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Changes to legislationThe main government agency thatenforces the Indonesian Anti-CorruptionLaw is the Corruption EradicationCommission (Komisi PemberantasanTindak Pidana Korupsi, commonly knownas KPK), which was established underthe 2002 Corruption EradicationCommission Law (KPK Law). The KPKcoordinates with other agencies in theeradication of bribery and corruption,conducts investigations and prosecutesbribery offences, undertakes action toprevent bribery and monitors governance.To carry out its enforcement duties, theKPK is granted certain powers toundertake specific measures, including,among others, using wire-tapping,instructing the relevant institution toimpose a travel ban and ordering banksor other financial institutions to blockaccounts potentially holding the proceedsof corrupt acts.

This year, a proposed amendment to theKPK Law has been included in the 2015National Legislation Program (Prolegnas).One of the key provisions that isproposed to be amended is removingKPK’s authority to conduct surveillance orwiretapping during the preliminary phaseof investigations. The supporters of theproposed amendment are of the viewthat such KPK authority may violatehuman rights. However, without thisauthority, the KPK would be preventedfrom launching “sting” operations aimedat catching suspects red-handedaccepting bribes. According to mediareports, President Joko Widodo will rejectany plans to revise the KPK Law. Thismessage has not been formally conveyedto the House of Representatives, hencethe status of the proposed amendment isstill unclear.

ProsecutionsThe KPK has been actively seeking tocombat corruption, and this isdemonstrated by the large number ofhigh profile corruption cases againstjudges, high ranking government officials,and members of the House ofRepresentatives which have beenbrought to court. From 2004 to the endof May 2015, there have beenapproximately 300 corruption cases thathave been decided. Many of theinvestigations and court proceedingshave caught the attention of the mediaand the public.

In early 2015, the former Chief Justice,Akil Mochtar, of the IndonesianConstitutional Court (which hadpreviously been heralded as one ofIndonesia’s most credible institutions),was sentenced to life in jail following hisconviction for accepting more thanUSD 5 million in bribes to influence theresults of regional election disputes andmoney laundering. While, it was the firstinvestigation and arrest involving aConstitutional Court Justice, it was by nomeans the first case involving anIndonesian judge, as there had been anumber of earlier cases and convictionsinvolving Indonesian judges. Also, relatedto this case, the former Banten Governor,Ratu Atut Chosiyah, was found guilty ofbribing Akil Mochtar. She was sentencedto seven years in prison and finedIDR 200 million (currently approximatelyEUR 13,000 or USD 15,000).

Also in 2015, Andi Mallarangeng, theformer Youth and Sport Affairs Minister,was sentenced to four years in prisonand fined IDR 200 million following hisconviction for accepting bribes (IDR 4billion and USD 550,000 [togethercurrently approximately EUR 767,000 or

USD 850,000]) from a contractor in theconstruction of the Hambalang sportscomplex. Part of the money that AndiMallarangeng received was used to fundhis campaign in the Democratic Partychair election. This Party is the politicalvehicle of the former President, SusiloBambang Yudhoyono. Former partytreasurer of the Democratic Party, AnasUrbaningrum, recently was sentenced tofourteen years in prison by the SupremeCourt for his involvement in theHambalang corruption case.

In 2014, the Jakarta Anti-CorruptionCourt sentenced Rudi Rubiandini, theformer Head of Indonesia’s oil & gasregulator SKK Migas, to seven years inprison for money laundering andaccepting bribes from Singapore-basedKernel Oil Pte Ltd. and Indonesia-basedKaltim Parna Industri. These bribes weregiven in exchange for securing a win inan oil tender. As a result of theinvestigations and court proceedings, theformer Energy and Mineral ResourcesMinister, Jero Wacik has also beennamed a suspect by the KPK. Jero Wacikis also alleged to have accepted bribesand laundered money received fromSingapore-based Kernel Oil Pte Ltd. andIndonesia-based Kaltim Parna Industri.

Also in 2014, the Supreme Courtsentenced a high ranking police officer,Inspector General Djoko Susilo, to 18years imprisonment and ordered him torefund IDR 32 billion (currentlyapproximately EUR 2.16 million orUSD 2.46 million) to the State for hisinvolvement in a graft-ridden drivingsimulator procurement project.

DevelopmentsAs mentioned earlier, the KPK is the maingovernment agency that enforces the

Indonesia

Anti-Corruption Law. The IndonesianPolice and the Public Prosecutor’s Officeare the principal State agencies thatprosecute any crime against Indonesianlaw, including the Anti-Corruption Law.

Earlier this year, there was high tensionbetween the KPK and the Police, whichresulted in a stand-off between thetwo agencies.

Shortly after President Joko Widodoannounced in late 2014 that he wouldappoint Commissioner General BudiGunawan as the Indonesian NationalPolice Chief, the KPK revealed that it hadbeen investigating Budi Gunawan for

corruption, and urged President JokoWidodo to drop his nomination.

In retaliation, the Police charged two KPKcommissioners with offences. In a movethat is widely seen as condoning thePolice assault on the KPK, PresidentJoko Widodo suspended the two KPKcommissioners and appointed threetemporary commissioners.

Presently, the selection committeecomprising nine female activists has beentasked with selecting the new KPKcommissioners (one head and fourdeputies) to be appointed by thePresident and approved by the Houseof Representatives.

TrendsIndonesia’s Transparency InternationalCorruption Perception ranking for 2014improved to 107 out of 175 countries.The ability for greater national andinternational co-operation and intelligencesharing has led to more effectiveenforcement. Domestic surveys indicatethat Indonesians are becomingincreasingly intolerant of corruption.President Joko Widodo has pledged hisongoing commitment to fight corruption.These trends and developments offerhope and greater certainty in the fightagainst corruption in Indonesia.

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ProsecutionsWhile there had previously been onlythree prosecutions in Japan for bribery offoreign public officials pursuant to theUnfair Competition Prevention Act(UCPA)33 over the first 15 years since itsenactment, three top executives of JapanTransportation Consultants, Inc. (JTC), aJapanese company, were abruptlyprosecuted in July and August 2014pursuant to the UCPA in connection withpaying bribes of approximatelyJPY 144 million (currently approximatelyEUR 1 million or USD 1.2 million) to

public officials in Vietnam, Indonesia andUzbekistan to gain unfair advantage forJapanese-funded railway projects in theircountries. The Tokyo District Courtsubsequently sentenced the executivesto imprisonment of two to three yearseach (suspended for three to four years)and also fined the companyJPY 90 million (currently approximatelyEUR 660,000 or USD 725,000 million).

Shortly before the above case, in awritten follow-up report submitted to theOECD, published in February 201434,

Japan disclosed certain enhancementsand increased resources to investigateand prosecute the bribery of foreignofficials more effectively. The JTC casemay well indicate that thoseenhancements and resources are alreadymaking a difference in Japan’s responseto foreign bribery.

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Japan

33 http://www.wipo.int/wipolex/en/text.jsp?file_id=254517.34 http://www.oecd.org/daf/anti-bribery/JapanP3WrittenFollowUpReportEN.pdf.

http://www.oecd.org/daf/anti-bribery/JapanP3WrittenFollowUpReportEN.pdf

http://www.wipo.int/wipolex/en/text.jsp?file_id=254517

Changes to LegislationOn 27 March 2015, the ImproperSolicitation and Graft Act (the Graft Act),a new anti-bribery law, was enacted,which will come into force after18 months, on 28 September 2016.

In comparison to the previous anti-briberyregime under the Korean Criminal Code(KCC), the main difference is theelimination of the “nexus” requirement.Under the Graft Act, there is no longer aneed to prove a direct link between a gift(i.e., something of value) and a favourprovided in exchange for such gift to theextent the value of the gift is higher than(i) KRW 1 million (currently approximatelyEUR 800 or USD 890) per occurrence or(ii) in aggregate, KRW 3 million (currentlyapproximately EUR 2,400 or USD 2,700)per year.

This is considered to be a more effectivedeterrent to bribery, since a public officialwho offers, solicits or accepts a gift of acertain value is punishable regardless ofwhether such gift is given in connectionwith the public official’s official duties or inexchange for any favour.

In addition, the Graft Act applies not onlyto “public officials” but to spouses of thepublic officials, news reporters and publicor private school teachers.

The penalties under the Graft Act includeimprisonment of up to three years or a

fine of up to KRW 30 million (currentlyapproximately EUR 24,000 or USD27,000). Moreover, a fine may also beimposed on a corporate entity in theevent any of its officers, director oremployees is in violation of the Graft Act.

While welcomed for its firm anti-corruption stance, the Graft Act iscurrently undergoing challenge on thegrounds that it is unconstitutional.

ProsecutionsThe most recent – and high-profile –corruption-related case is theinvestigation of POSCO Engineering &Construction, the largest steel-makingcompany in Korea.

On 13 March 2015, prosecutors raided thehead office of POSCO in relation toallegations that the company had overseasslush funds from overstating the amountof funds needed to pay subcontractorsin Vietnam.

The raid came a day after Prime MinisterWan-Koo Lee declared an “all-out war”on corruption.

A number of former and current seniormanagement of POSCO have beeninvestigated, detained and/or charged formisappropriation and embezzlement.These investigations and prosecutions arestill on-going.

Historically, the Korean government hasfailed to take effective steps to preventcorruption within major Koreancompanies, so it remains to be seenwhether this “zero tolerance” approachwill continue.

OECD ReportOn 8 May 2014, Korea submitted a follow-up report in relation to the Phase 3 Reporton Korea issued by the OECD WorkingGroup on Bribery in October 2011.

Korea has made headway inimplementing the recommendations setforth in the Phase 3 Report, with ten outof 16 recommendations fully implementedand four partially implemented.

Notably, Korea established a newconsultative body to gather intelligenceon suspected bribery activities outsideKorea and also took measures to ensurethat foreign bribery case records are nolonger destroyed within three years butkept for up to 70 years.

Furthermore, Korea has taken positivesteps to raise awareness among theprivate sector of the significant impact offoreign bribery and on the adoption ofinternal controls and compliance measures.

The OECD Working Group on Briberystated it will monitor progress on theremaining recommendations.

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South Korea




Changes to LegislationJudicial Interpretation of theCriminal LawOn 26 December 2012, the SupremePeople’s Court (SPC) and the SupremePeople’s Procuratorate jointlypromulgated the Interpretation of SeveralIssues Concerning the Application of Lawfor Handling Criminal Cases of Bribery(the Interpretation) which took effect on1 January 2013. The Interpretationprimarily concerns bribes offered byindividuals to government officials underArticle 389 and 390 of the Criminal Law.

Articles 2 to 4 of the Interpretationprovide guidance in determining whethera bribe is considered a serious case,potentially triggering higher penalties. Thedetermination turns on the definitions of“severe”, “causing significant losses tothe State”, and “significantly severe”under Article 390 of the Criminal Law.Serious cases include bribes to officialsresponsible for food, drugs, productsafety, and environmental protection thatwould seriously harm the public interest,thereby indicating the priority placed onprotecting the public’s health and safety.The Interpretation also includes a numberof incentives for voluntary disclosure.

The definition of inappropriate benefits issimilar to that provided under a SPCinterpretation of commercial briberyissued in 2008. Therefore, bribes paid togovernment officials for obtaining anunfair competitive advantage may also fallunder Article 389 of the Criminal Law.

Inappropriate monetary benefits shall beconfiscated, ordered to be refunded orreturned to the victim. Non-monetarybenefits, such as operating licences orpromotions, shall be dealt with by therelevant department in accordance with“applicable regulations”, meaningperhaps suspension or cancellation ofsuch benefits (Article 11). Therefore, inaddition to fines and reputationaldamage, a company committing such acrime may also suffer significantadditional economic loss as a resultof conviction.

Healthcare Blacklisting RegulationThe National Health and Family PlanningCommission issued the Provisions on theBlacklisting of Commercial Bribery inHealthcare Procurement (the Circular) on25 December 2013. The Circular cameinto effect on 1 March 2014.

The Circular applies to the procurementof drugs, medical equipment andconsumables. The provincial authority ofthe Health and Family PlanningCommission is responsible for keepingrecords and the national authority isresponsible for consolidating localrecords based on the monthly reportsfrom the local authorities. The followingwill be blacklisted:

n any offender who commits the crimeof paying bribes and is convicted by acourt judgment; or any offender whocommits the more minor crime ofpaying bribes for which criminalpenalties are exempted;

n any offender who commits a moreminor crime of paying bribes wherethe prosecutor issues a decision notto prosecute;

n any offender who commits theoffence of paying bribes for which theChinese Communist Party’s Disciplineand Inspection Commission or theAdministrative Supervision Authorityimposes penalties;

n any offender who commits theoffence of paying bribes on which theauthority of Finance, StateAdministration of Industry andCommerce (AIC) or Food and DrugAdministration imposes administrativepenalties; and

n any offender who commits other actswhich shall be included in the blacklistas provided in any laws, regulationsand rules.

Penalties for blacklisted companies:

n If the company is being blacklisted forthe first time, it shall be barred fromprocurement by public hospitals(including hospitals receivinggovernment funds) in the sameprovince in which it is blacklisted, fortwo years. It will also be penalised insimilar public procurement bids inother provinces (by having its scoresreduced) for two years;

n If it is blacklisted twice or more thantwice in a five year period, it shall bebarred from procurement by all thepublic hospitals in China fortwo years.

People’s Republic of China

Administrative Regulation ofPublicising PenaltiesIn August 2014, State Administration ofIndustry and Commerce (AIC), theadministrative authority that is responsiblefor enforcing anti-bribery regulation incommercial sectors, issued the InterimRegulation of Publicising AdministrativePenalties Issued by the AIC. Thisregulation requires local AICs to publiciseany decision of administrative penaltiesand the summary of the decision throughthe AIC’s official websites of enterpriseinformation within 10 to 20 days after thedecision is made.

This regulation, in combination with theblacklisting regulation as discussedabove, may significantly change thedynamics between the local AIC and atarget of anti-bribery investigation,especially in the healthcare sector.

Before this regulation was issued, partiestended to agree on a relatively minorcharge pressed by the local AIC so thatthey could close the case as soon aspossible, minimize reputational risks andprevent the investigation from beingexpanded to a wider scope. For example,parties may agree on a non-briberycharge, or a bribe charge with much lessscope (thus with less penalties). Althoughsuch a settlement agreement is notlegally binding under PRC law, it can berelied on in practice as a gentlemen’sagreement with the local AIC.

Since the above two regulations wereissued, however, the most importantconcern that a target of anti-bribery

investigation has is no longer the amountof the penalty or the result of the specificinvestigation itself. Instead, the impact ofthe penalty decision on its reputation andoverall business in China (in thehealthcare sector at least) and, tomultinationals, the reporting obligation inother jurisdictions would be crucial to thetarget, since the penalty and its groundwould be publicised and the companywould be officially blacklisted in thehealthcare sector (while in other sectors,such penalty record could be regarded asa negative factor in public procurement).

Consequently, the new regulations mayalso create more tension between thetarget and the local AICs, because theformer would be much more reluctant toadmit to any charge, for fear of the aboverisks. Therefore, whereas previously thelocal AICs would mainly rely on thetargets’ admission and confession toclose a case in practice, in the future theymay have to build a much stronger casewith solid evidence, in order to withstandany potential defence or challengebrought by the target through theadministrative procedures. It is a newbattlefield, with more interest and risk atstake for both sides.

ProsecutionsThe most high-profile prosecution inChina is the GSK case, in which Chineseauthorities imposed criminal fines ofapproximately USD 500 million on Britishpharmaceutical companyGlaxoSmithKline for bribing Chinesehospitals and doctors. The amount of the

fines imposed on GSK was the highestcriminal fine ever imposed.

GSK’s senior managers, including theChina General Counsel, were arrestedand prosecuted for participating in thescheme, disclosed by an internalwhistleblower. A local AIC official inShanghai was sentenced for takingbribes in return for illegally closing ananti-bribery investigation of the company.The CEO of the China business, a Britishcitizen, was pressured to return to Chinaand confess to the authorities after hehad left the country at the very earlystages of the investigation. An externalinvestigator whom GSK hired toinvestigate the whistleblower wasprosecuted and sentenced for illegallyobtaining personal data. The individualdefendants were forced to confess on anational TV news program before thecriminal judgments were issued. Thecompany is now facing investigation byBritish authorities under the UKBribery Act.

This case perfectly reflects all the keyimpacts or intended results of the threenew pieces of legislation discussed aboveand shows close coordination betweenthe various authorities in the recent PRCanti-corruption campaign. Theaggressiveness in both the process andthe result of this case is unprecedented inChina, which may indicate a new era inlaw enforcement against commercialbribery and multinational corporations.

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Changes to LegislationSingapore Prime Minister Lee HsienLoong announced in January 2015 thatthe government will be introducingvarious initiatives, including a review ofthe Prevention of Corruption Act(Cap 241) (PCA), the main anti-corruptionlegislation in Singapore.

ProsecutionsThe Chief Justice recently provided timelyguidance on sentencing for corruptioncharges in relation to the private sector. Inthe recent case of Public Prosecutor vSyed Mostofa Romel [2015] SGHC 117,the Court clarified that there is nodistinction between the sentencing policyfor corruption in the private and publicsectors, stressing that the severity of theconsequences of the conduct is the keyfactor in determining the appropriatesentence. On the facts of the case, theCourt tripled the sentence imposed onthe accused by the lower courts, as itdeemed it to be “manifestly inadequate”.In highlighting the zero tolerance policyagainst corruption, the Chief Justicecautioned that “this type of corruption isantithetical to everything Singaporestands for” and that “clean and honestdealing is one of [Singapore’s] keycompetitive advantages and corruptioncompromises the predictability andopenness which Singapore offers andinvestors have come to expect. This is ahard won prize achieved through ourcollective efforts as a society and wemust not allow these to be undone.”

In the recent decision of PublicProsecutor v Teo Chu Ha [2014] SGCA45, the Court of Appeal recognised that

perpetrators are inventing increasinglycomplex and sophisticated schemes in abid to evade the PCA. In line withSingapore’s firm stance against corruptactivities, the substance and context oftransactions will be scrutinised to ensurethat the “pith and marrow” of the PCA isnot undermined or circumvented bythese schemes.

In the high-profile so-called “sex-for-grades case” of Tey Tsun Hang v PublicProsecutor [2014] 2 SLR 1189, the HighCourt acquitted a law professor of thecharge of receiving gratification from astudent. This followed a finding by theHigh Court that the student provided thegratification without corrupt intent but dueto feelings of infatuation with theprofessor. Despite the acquittal, the HighCourt emphasised that it did not condonethe professor’s abuse of his position. Thisdemonstrates that, notwithstandingSingapore’s zero tolerance policy towardscorruption, the courts will adopt anuanced approach to distinguish moraland criminal wrongs, in theappropriate case.

Further anti-corruptioninitiativesPrime Minister Lee announced in January2015 that the manpower of theCorruption Practices Investigation Bureau(CPIB) – the government agencyentrusted with investigating corruptionoffences in Singapore – is to be increasedby more than 20%. In addition, aone-stop Corruption Reporting Centre willbe established to make it easier formembers of the public to report cases ofcorruption.

According to an inaugural CPIB reportdetailing trends from 2010 to 2014, theaverage number of people prosecuted asa result of CPIB investigations over thelast three years was 170. In 2014, 85%of the 136 cases registered forinvestigation were from the private sector.The private sector also accounted for88% of the prosecutions in 2014. Theconviction rate remains high, atabove 95%.

Speaking in January 2015 at aconference on maintaining integrity in thepublic sector35, Prime Minister Lee saidthat Singapore’s system is generally“clean” and “maintains high standards”,but noted that the problem of corruption“will never disappear completely”. ThePrime Minister’s comments were madeagainst the backdrop of Singapore havingfallen two places to be placed seventh inthe Transparency International CorruptionPerceptions Index. The slide, Mr Leesaid, could have been due to recent highprofile corruption cases involving civilservants, including a so-called “sex-for-contracts case” of a top officer in the CivilDefence Force and the misappropriationof funds by a head of a branch ofthe CPIB.

A “shining exception” in a world wherecorruption is endemic in many countries,Prime Minister Lee said Singapore wouldhave to “work doubly hard to maintain thetrust [it’s] earned” after such cases whichhurt Singapore’s reputation.

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Singapore*

35 Public Services Values Conference, 13 January 2015.

*Contributed by Cavenagh Law LLP, our Formal Law Alliance partner in Singapore.

Changes to LegislationOn 1 May 2015, the National LegislativeAssembly (NLA) approved a draft OrganicAct on Counter Corruption (theAmendment Act) to amend the OrganicAct on Counter Corruption B.E. 2542(1999) (as amended) (the Organic Act),which is the principal piece of legislationdealing with acts of corruption bydomestic public officials. The AmendmentAct came into force on 10 July 2015.Whilst Thailand is not a party to theOECD Convention on Combating Briberyof Foreign Public Officials in InternationalBusiness Transactions, the AmendmentAct seeks to criminalise bribery of:

(i) “foreign public officials”, being anyperson holding a legislative,administrative or judicial office for aforeign country, any person exercisinga public function for a foreign country,including for a state agency or stateenterprise, whether appointed orelected and whether having apermanent or temporary position andregardless of whether such officialreceives a salary or otherremuneration; and

(ii) “officials of international publicorganisations”, being any officialor agent of a publicinternational organisation.

It is a criminal offence under theAmendment Act for any foreign publicofficial or official of an international publicorganisation to (i) demand, accept oragree to accept any property or otherbenefit for himself/herself or for any otherperson in return for discharging oromitting to discharge any duty, regardlessof whether such action is a wrongful act;or (ii) discharge or omit to discharge anyduty in return for any property or otherbenefit which he/she has demanded,received or agreed to receive beforetaking office.

The Amendment Act also imposessanctions on any person who(i) demands, accepts or agrees to acceptany property or other benefit in return forinducing or having induced any foreignpublic official or official of an internationalpublic organisation by dishonest orunlawful means or by influencing withhis/her unjust power to discharge or omitto discharge any duty in his/her office, ina manner to take advantage or cause anydisadvantage to any person; or (ii) grants,offers to grant or promises to grant anyproperty or other benefit to any foreignpublic official or official of an internationalpublic organisation with intent topersuade such official to wrongfullydischarge, omit to discharge or delay theperformance of any duty.

The penalties imposed by theAmendment Act for the above offencesinclude fines of between THB 100,000(currently approximately EUR 2,700 orUSD 3,000) and THB 400,000 (currentlyapproximately EUR 10,800 orUSD 12,000), imprisonment of betweenfive to 20 years, and lifetimeimprisonment (for an offence committedby foreign public officials and officials ofinternational public organisations).

To ensure that the new sanctions will beenforced effectively, the National Anti-Corruption Commission (NACC), whichwas established under the Organic Act asa main authority responsible for preventingand suppressing corruption in thegovernment sector in Thailand, is nowempowered to (i) inquire and decidewhether any foreign public official, official ofan international public organisation orperson, has committed any offence underthe Amendment Act, (ii) inquire and decideon any offence which is within the authorityof the NACC but committed outsideThailand, and (iii) coordinate with foreigncountries for the purpose of performing its

duties under the Organic Act, includinglending support to foreign countriespursuant to the regulations for internationalcooperation in criminal matters.

In addition to the above, since theannouncement of a military coup inThailand in May 2014, the NationalCouncil for Peace and Order (NCPO,which is the de facto supremegovernmental authority) has issuedvarious notifications and orders with aview to overseeing and combatingcorruption in the government sector. Forexample, since 30 June 2014, all stateenterprises in Thailand (i.e. governmentorganisations or business units owned bythe government and companies orpartnerships which are more than 50%owned by the government) are requiredto report to the NCPO (i) any investmentor new project with a value exceedingTHB 100 million (currently approximatelyEUR 2.7 million or USD 3 million) and (ii)any transaction with a value exceedingTHB 100 million which is unusual or notin the ordinary course of business.

New Anti-CorruptionWatchdogAs one of the urgent policies of theNCPO is to tackle all corruption in thegovernment sector, the NCPO on 5January 2015 appointed a separatenational anti-corruption commission(National Commission, which is underdirect supervision of the NCPO andchaired by General Prayuth Chan-ocha,Head of the NCPO) to serve as thecentral point for cooperation between thepublic sector and the private sector inpreventing and suppressing corruption inthe government sector. Key functions ofthe National Commission include, amongothers, to forge cooperation betweenrelevant government agencies dealingwith anti-corruption tasks and the privatesector to prevent and eradicate


Thailand




corruption, to listen to the proposals ofthe private sector in dealing withcorruption, and to make proposals onprevention and eradication measures tothe Constitutional Drafting Committee forconsideration in drafting the constitution.

GuidelinesIn order to ensure effective administrationby the NCPO in preventing and tacklingthe problem of corruption andmalfeasance in public office, the NCPOon 15 December 2014 issued an orderrequiring all public sector andgovernment agencies to lay downmeasures or approaches to prevent andsolve the problem of corruption andmalfeasance in public administration andgovernment agencies, with an emphasison promoting good governance andpromoting the participation of all sides inscrutinising and monitoring to checkagainst corruption and malfeasance.Where an accusation is made, or there iscause to suspect, that any civil servant orgovernment officer has committed or isinvolved in corruption and unlawful

practices, the head of the relevantgovernment office and agency shall takemeasures in accordance with the relevantlaws and regulations, and ensure thatdisciplinary, administrative and legalmeasures are enforced strictly andpromptly. Failure to comply with theabove requirements could result in thehead of that government office orsupervisor being disciplined or liable forcommitting a criminal offence.

ProsecutionsEach year a number of corruptionallegations involving public officials arefiled with the NACC (which wasestablished under the Organic Act) forfurther investigation and proceeding.However, prior to the political turmoil anddeclaration of a military coup which tookplace in 2014, enforcement activity forcorruption offences involving high-rankingpolitical officials (except for a falsedeclaration of assets and liabilities ofpersons holding political positions) wasvery rare in Thailand due to governmentinterference. The first case took place in

2008, in which former Prime MinisterThaksin Shinawatra was sentenced totwo years in prison for breaching theOrganic Act by facilitating his wife’spurchase of some land from Thailand’sFinancial Institutions Development Fundat a discount price. The most recent andcontroversial case involves allegations ofcorruption in the former government’srice-pledging scheme. This case hasattracted a lot of attention both inThailand and overseas. On 8 May 2014,the NACC voted unanimously to indictformer Prime Minister YingluckShinawatra on charges of dereliction ofduty in overseeing the corruption-pronerice pledging scheme, and as a result,impeachment proceedings have beenbrought against Yingluck. The case is stillunder consideration by The SupremeCourt Criminal Division for PersonsHolding Political Positions. If found guilty,Yingluck could be banned from politicalactivity for five years, and be liable toimprisonment of up to ten years.

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