Bribery and corruption in the shipping industry

A Singaporean case study

Global Publication September 2015

‘ … this kind of corruption is antithetical to everything that Singapore stands for as it undermines the confidence that if a person needs something such as a permit or licence to do business in Singapore, it will be forthcoming without bribes being paid. It also destroys the notion that business in Singapore is clean and transparent and that rules are there for good reason rather than to give people in whom discretion is vested or upon whom duties are placed, opportunities to have their palms greased and their pockets lined. In such cases, all would-be offenders must be warned that such acts, which undermine legitimate rights, will not be tolerated and will be severely dealt with.’ (Menon CJ in Public Prosecutor v Syed Mostofa Romel [2015] SGHC 117, at para. 30)

A recent case in Singapore, Public Prosecutor v Syed Mostofa Romel, has served to highlight some key lessons for the shipping industry in face of growing anti-corruption enforcement.

The case concerned bribery charges against Syed Mostofa Romel (the respondent), an associate consultant in the marine surveying business of PacMarine Services Pte Ltd. The respondent was responsible for conducting inspections of vessels seeking to enter an oil terminal, which involved ensuring vessels were sea-worthy and free of any high-risk defects; ensuring cargo was properly documented; and ensuring vessels had correct documentation. Where defects were identified during an inspection, vessels would be allowed to enter the terminal and remedial works would be carried out if the defects posed low to medium-risk; however, if defects were classified as high-risk, rectifications would have to be carried out prior to entering the terminal. Regardless of classification, the respondent was responsible for preparing a report and submitting it to his superior.

On three occasions, the respondent solicited bribes from ship masters in return for submitting false inspection reports that would allow the vessels to enter an oil terminal. Chief Justice of Singapore Sundaresh Menon (Menon CJ) allowed an appeal brought by the Public Prosecutor against the sentence imposed on the respondent by a district judge, deciding it was manifestly inadequate and clarifying guidelines on sentencing for bribery and corruption offences.

The respondent was charged with three offences under Singapore’s Prevention of Corruption Act (PCA) – two charges were proceeded with and the remaining charge was taken into consideration when sentencing. The facts of the offences are as follows:

  • On March 10, 2014, the Respondent conducted a vessel safety inspection on the MT Torero at Vopak Terminal Banyan Jetty. After the inspection, he informed the ship master and the chief engineer of several high-risk observations which were likely to result in the vessel not being allowed to enter the terminal. The master disagreed with the observations and thought that the defects were minor ones which could be readily rectified. He asked the respondent how he could resolve the situation and the respondent informed him that money would do so. After some negotiation, the master agreed to pay the respondent US$3,000, while secretly reporting the bribe to his superiors.
  • On May 27, 2014, a sting operation was launched by the Corrupt Practices Investigation Bureau (CPIB) to catch the respondent in the act of bribery when the MT Torero arrived at the same port. The vessel was deliberately prepared with high-risk defects and the respondent was assigned to conduct its inspection. The ship master was again informed by the Respondent that these could be omitted from his report in return for a bribe, which was paid, and the altered report printed before the respondent was arrested by the CPIB.

The decision by Menon CJ highlights Singapore’s increased efforts to tackle private sector corruption. Although public sector offences typically attract custodial sentences, while private sector cases typically attract fines, this case illustrates that the distinction is not rigid nor is it reflective of the law in Singapore. The respondent was in a position to overstate risks and cause inconvenience as well as unnecessary expense and delay to ship masters unless a bribe was paid. The respondent could also offer to understate risks and in doing so threaten the safety of others in the oil terminal. In combining these two breaches of his duty by overstating the risks and offering to understate them, he could receive financial benefit in the process.

Menon CJ made clear that a custodial sentence is generally expected. Regardless of whether bribery is related to a private or public sector, sentencing will be determined by the severity and nature of the offence, public interest in prosecution, and its potential threat to safety of people and facilities. In this case, the maritime industry’s strategic significance to Singapore was given as a specific aggravating factor in sentencing considerations. The shipping industry accounts for roughly 7 per cent of Singapore’s GDP and provides employment for 170,000 people. Since increased corruption could have a large effect on the nation’s economy, Menon CJ recommended that bribery offences in shipping relating to Singapore be strictly punished, with longer prison terms for offenders. As a result, Menon CJ disagreed with the district judge who had sentenced the respondent to a two months’ imprisonment for each charge and instead sentenced the respondent to a terms of six months’ imprisonment for each charge, which were to run concurrently.

On a global scale, demands for bribes in ports pose a particular threat to the maritime industry. In the case at hand, the respondent was required to ensure that vessels were free of high-risk defects before entering the oil terminal. On two occasions, the respondent ignored his responsibilities and sought to illicit bribes – US$3,000 in each incident. The admittance of unsafe vessels was a significant threat to the people working in the terminal, the terminal itself, the crew of the vessel, and also the vessel itself. Ship masters should be aware that the consequences of paying bribes extend beyond potential prosecution to severe safety risks.

Acceding to demands for bribes may also constitute an offence under the PCA and other international anticorruption legislation. There is no indication in the decision as to whether the master was also charged with bribery. UK and US regimes, as well as the law in Singapore, prohibit giving a bribe unless there is an immediate threat of physical harm (whether to the ship master or the crew). In this case, the facts suggest that the respondent made no threat of death or bodily injury and so the ship master could have safely refused to make payment. The fact that a bribe is first introduced by the recipient does ‘not alter the corrupt purpose of the part of the person paying the bribe’ (US Congress, introducing the Foreign Corrupt Practices Act 1977). It is clear from Menon CJ’s decision that Singapore is willing to pursue individuals for instances of low-level bribery. The sentence imposed on the respondent should be a warning to ship masters against future opportunities to grease palms. The sting operation carried out by the CPIB should also dissuade persons tempted to receive bribes from making such demands.

Anti-bribery compliance is clearly gaining ground in the maritime industry. Corruption dramatically increases the costs of transporting goods by sea and small bribes are often deeply embedded in local culture. Harsher sentencing for offenders is one means of deterring demands for bribes. At the same time, shipping companies need to work together to fight corruption through collective action. Collective action initiatives are increasingly gaining interest from the shipping industry, as they provide the opportunity to engage with competitors and the public sector to combat systemic issues such as demands for small bribes. The World Bank has explicitly encouraged businesses to take part in collective action and funding is available for new enterprises.1 While companies may have ensured that the activities they control reflect good practice, isolated efforts are insufficient to counter institutionalised corruption.

In recent years, there has been a significant uplift in anti-corruption enforcement activity, coupled with increased cooperation between regulators. For the maritime industry, the case of Public Prosecutor v Syed Mostofa Romel reflects increasing stringency against a background of growing concern around the world for anti-bribery compliance. Masters and port officials should be aware that even low-level bribery will be pursued by enforcement agencies and prosecutors who are willing to pursue strict penalties to deter future offenders. At the same time, given the growing attention on graft in the maritime industry, now is the time for shipping companies to think about what they can do to change the wider business environment through collective action. The fragmented nature of the shipping industry makes fighting corruption difficult. The problem demands collaboration in order to put pressure on governments, port officials and the sector as a whole to improve their reputation for transparency and integrity.





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