By Anne Mizzi
In-house counsel have been urged to introduce compliance procedures to prevent suggestions of bribery following evidence that UK companies have made ‘facilitating payments’ to officials in developing countries.
The evidence was given to the House of Commons international development select committee by a number of senior executives at UK companies, including Unilever’s general counsel Stephen Williams.
At a hearing of the committee on 9 January, Williams said that the local boards at Unilever authorised the payment of ‘facilitating sums of money’ in developing countries in some circumstances as long as they met certain conditions.
Although Unilever prohibits bribery of officials for advantage, it allows staff to openly pay officials ‘modest’ sums to facilitate something that would happen anyway as long as it is in compliance with local custom and practice.
Williams emphasised that it is only in this context that payments would be tolerated, and that they are never encouraged.
BP Amoco’s group vice president and general auditor, Reg Hinkley, told the inquiry that the oil company followed similar procedures.
Under international law facilitating payments are not always illegal, although companies are required to label facilitating payments in the accounts. But it is predicted that the UK Government will soon introduce stricter rules to meet its international obligations under the 1997 Organisation for Economic Co-operation and Development (OECD) Convention.
Clifford Chance partner Jeremy Carver said in-house lawyers should introduce governance procedures to stamp out “facilitating payments”. “International sales arrangements need the most careful scrutiny,” he said.
Carver said arms and construction companies would be under particular scrutiny. “As an in-house lawyer you have to make sure that it is not just the letter of the law that has to be observed, you have to look forward to the things happening internationally in the future,” he said.
Carver added that the head of legal will be responsible for complying with legislation which the UK Government will have to introduce to meet its obligations under the (OECD) convention.
“The head of legal has the responsibility of advising the board and it has to be at board level that these things are appreciated.”
Strict application of the OECD convention could result in confiscation of all the profits from the venture. “If you apply the requirements strictly, the entire fruits of any contract will be forfeit,” Carver said.
Clifford Chance partner and former Serious Fraud Office chief, George Staple, said a key area of the inquiry is how contracts are obtained by UK companies. “General counsel have to be very much on their guard about the means by which contracts are formed,” he warned.
