The Foreign Corrupt Practices Act (FCPA) & UK Bribery Act (UKBA) Takeaways for Companies doing business in Nigeria

Background

For investors looking to
do business and companies doing business in Nigeria, there are myriad
considerations. Navigating the business landscape without falling foul of the
provisions of the UK Bribery Act 2010 (UKBA) and the US Foreign Corrupt
Practices Act 1977 (FCPA) should be a key consideration. These laws did not
come into force recently, but their application to Nigeria has never been more
relevant than now. The present leadership got elected on the promise of rooting
out corruption and has pursued its anti-corruption stance with more vigour than
any other democratically elected government. On the other hand, the leadership
has taken measures to encourage both foreign and domestic investors to do
business in the country.

This analysis seeks to
highlight the offences under the laws and how they can be avoided.

Scope of the Laws

The UK Bribery Act 2010

The Bribery Act was
enacted on 8th April 2010 but came into force on 1st June 2011. Its provisions
are on offences relating to bribery and for connected purposes.

The Scope of the Bribery Act

The Bribery Act creates 3
offences:

1.
Bribing Another Person:
This includes promises and requests for financial or other advantages for the
improper performance of a relevant activity. Activities to which bribery in
this context relates must meet two conditions. First, the act must fall into one
of the following categories.

2.
a public nature,

3.
connected with a business,

4.
performed in the course of a person’s
employment or

5.
any activity performed by or on behalf of a
body of persons (whether corporate or unincorporated).

Furthermore, there must be
an expectation of good faith and impartiality in the performance of the
activity. Also, performance of the activity must put the performer in a
position of trust. Any activity that falls into the categories stated above and
meets one of the fiduciary conditions in the second test, is a relevant
activity under the Act.

1.
Bribing of Foreign Public
Officials/Agents of Public International Organisations:
This applies to persons who, with intention to gain advantage, retain or obtain
business, offer or give any financial or related advantages to a foreign public
official (in his capacity as a public official) where the foreign public
official was neither permitted nor required by written law to be so influenced.
It does not matter whether the bribery act was done directly or to/through a
third party.

2.
Failure of Commercial Organisations to
Prevent Bribery: This offence is exclusive to commercial
organisations (companies and partnerships). It arises where a commercial
organisation fails to prevent an associated person (persons who perform
services for or on behalf of the commercial organisation) from bribing another
person with the intention of obtaining business, or an advantage in the conduct
of business, for that commercial organisation. Associated persons as used
here include employees, agents, subsidiaries, and partners.

To the extent that this
offence does not require proof of intention by the commercial organisation,
this is an absolute liability offence. The only defence under the Act is when a
commercial organisation proves that it had in place adequate procedures to
prevent associated persons from undertaking the relevant corrupt acts.

The Bribery Act applies
to:

– British
citizens, bodies incorporated in the United Kingdom, corporate organisations
with a business presence in the UK (whether incorporated in the UK or not).
Once a connection is made with the UK by a business, the Act can take effect.
Therefore, the act has a broad extra-territorial application as it covers
offences in the UK as well as overseas.

The Foreign Corrupt
Practices Act 1977

The FCPA was enacted to
check the prevalent practice of making illegal payments and bribing foreign
public officials by American companies in the seventies. Since then, numerous
convictions have been obtained under the Act.

Scope of the
FCPA

Basically, the FCPA makes
it unlawful for persons to make payments or offer gifts or carry out any act in
furtherance of such payments/gifts, directly or indirectly to a foreign
official for the purpose of influencing the decision of such official.

The FCPA applies to:

– United
States (U.S.) persons (individuals and corporate bodies) :

– foreign
non-residents in the US (who carry out acts in furtherance of a corrupt
payment)

– Officers,
Directors, Employees, Agents, and Stockholders of any of the categories above.

Defences under the
FCPA

– Facilitation
Payments

o By virtue of
Section 78dd-1 (b) the Act provides for an exception to the general rule by
stating that any facilitating or expediting payment to a foreign official,
political party, or party official, the purpose of which is to expedite or to
secure the performance of aroutine governmental action by a foreign
official, political party, or party official will not constitute an offence
under the Act.

– Lawful
Payments

o By virtue of
Section 78dd-1 (c) It shall be an affirmative defence to actions under the Act
to prove that the payment, gift, offer, or promise of anything of value that
was made, was lawful under the written laws and regulations of the foreign
official’s, political party official’s, or candidate’s country. Payments that
are lawful under a local country’s laws may also serve as a defence under the
UKBA.

– Bona
fide Expenditure

o They were
reasonable and bona fide expenditure, such as travel and lodging expenses,
incurred by or on behalf of a foreign official, party, party official, or
candidate and were directly related to the promotion, demonstration, or
explanation of products or services; or the execution or performance of a
contract with a foreign government or agency thereof.

These persons as stated
above are-

– The
definition in section 8(1) especially in relation to for or on behalf
of the relevant commercial organisation.

Note that while the UKBA
prohibits bribes to foreign officials just like the FCPA it goes further by extending
same to bribe perpetrated in a private commercial setting.

What Companies in
Nigeria need to Know !

In view of the above,
foreign companies and investors looking to do business or carrying out projects
in Nigeria either directly or through subsidiaries must balance their
activities relative to these laws. An issue which may arise is the
status of facilitation payments in Nigeria. Clearly, the definition of
facilitation payments under the FCPA covers a common practice in Nigeria.
Nonetheless, the line between an intended facilitation payment and a bribe can
be thinner than a strand of thread.

For instance, the Code of
Conduct for Public Officers[2] provides
that a public officer shall not put himself in a position where his personal
interest conflicts with his duties and responsibilities. [3]Public officers are also prohibited
from asking for or accepting property or benefits of any kind on account of
anything done in discharge of duties.[4]

Avoiding this pitfall (and
others) arising from these laws requires Companies and investors to be
proactive in their business operations. Thus, the following action points
should be considered or implemented for such investors/Companies operating in
the Nigerian environment.

Action Points for
Companies

– Utilization
of local agents/suppliers with experience and established relationships with
the government agencies.

– Compliance
training for key personnel of the Companies.

– Compliance
checklist to avoid violations must be put in place.

– Effective
control measures should be put in place over associated persons and agents. For
example, this could include agreements with agents where they undertake to
avoid any act that would fall foul of the relevant laws (FCPA/UKBA). Also, the
scope/authority of agents must be clarified before the start of the
relationship.

– In-depth
due diligence on potential investments and acquisitions. This is relevant to
protect the investor from losses arising from the prosecution of the subject of
investment for prior acts.

– Enunciation
of anti-corruption policies in businesses. Such policies should disallow
facilitation payments (in view of the non-recognition of these types of
payments under the UKBA). Receipts must be obtained for payments made to the
government agencies.

The content of this
article is intended to provide a general guide to the subject matter.
Specialist advice should be sought about your specific circumstances.

Should you have any
questions relating to this article – please do not hesitate to reach Dayo or
Bukky :