General counsel are commonly advised to include so called “audit rights” in contracts with third parties who may interact with officials of foreign governments on a company’s behalf, such as vendors, sales representatives, distributors and other kinds of third party intermediaries (TPIs). Indeed, the U.S. Department of Justice and the U.S. Securities and Exchange Commission have encouraged companies to include Foreign Corrupt Practices Act (FCPA) audit rights as part of a robust compliance program. GCs tasked with drafting a right-to-audit clause should consider the following.
Rather than taking a generic “one-size-fits-all” approach, a clear and detailed audit clause may avoid many costly disputes. Clauses should be tailored to address the specific risks of a given relationship and be as detailed as reasonably possible. In drafting a right-to-audit clause, the following issues should be considered for inclusion:
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