A new era for Whistleblowers in Australia
Amendments to the laws have passed both Commonwealth Houses of Parliament.
When considering the risks of corrupt activity taking place on a ship, it is important for shipowners, managers and charterers to understand the very great pressure that can be put on the ship’s master to pay small sums to allow the day to day business of the ship to continue unimpeded. It is widely acknowledged that the Master is under considerable daily pressure due to commercial, personnel, financial, safety and port state considerations, as well as a myriad of other distractions. Having to fend off avaricious local officials who insist on payment before agreeing to carry out their duties – known as facilitating or grease payments – presents an additional frustration for professional masters who naturally just want to focus on operating the ship.
In any company anti-bribery and corruption (ABC) policy, it is important to consider these pressures and practical matters when thinking about how to ensure compliance with the 2010 Bribery Act and other anti-bribery statutes. A policy or guidance given to a master, written in the relative calm of an office in Akti Miaouli or London, may not be realistic should the master be placed under real pressure by aggressive local officials.
The reality is that if an ABC policy is unworkable it will be ignored. Many masters view giving a gift to someone in order to get a job done as distinct from payment made in order to gain an advantage such as a surveyor accepting a dirty hold or moving the ship a couple of places up the queue for a berth which they would view as bribery. In many places, a grease payment is obligatory and the consequences of not giving a small gift of cigarettes, alcohol or food can cause delay, loss and damage, false arrest or detention out of all proportion to the value of the “gift” or payment refused. And it is wrong to think that such behaviour only happens in certain developing countries; we hear that many ports in the developed world are as bad, if not worse, for these demands.
Any robust and workable policy must be written with these factors in mind. The policy alone will not keep the company safe from allegations of bribery however well drafted – the master will need training and support from all interested parties if he is to be able to resist effectively. Aside from issues regarding threats of physical harm, which is not unknown, in real terms the refusal to pay a bribe will often result in a negative impact on a ship’s operation and efficiency and, in turn, its ability to meet its commercial deadlines – which usually has a detrimental effect on the master’s career. Without support and training, the choice for the master can be stark – agree to the minor payment and make the problem “go away” or suffer the consequences. Naturally, masters might assess the risk and choose the latter option believing that the minor infraction is without any real consequence. However, from a corporate point of view, this signals a failure, certainly in terms of the UK Bribery Act, to prevent bribery by having adequate procedures in place to prevent such conduct (Section 7 of the Act).
The UK Bribery Act 2010 (the Act) came into force in July 2011 and is viewed as one of the toughest of all the anti-corruption statutes in place globally. The Act is based on various anti-corruption conventions, and it is likely that other states will seek to put equally stringent regulations in place in the years to come as the tolerance levels for corruption continue to diminish. The Act is tough as it outlaws all types of bribery, both incoming and outgoing, but also makes clear that small payments made in the course of business – so called grease or facilitating payments – are also unlawful.
The Act requires all companies to ensure that they have appropriate policies and procedures in place, and the Ministry of Justice refers to six principles which should be embraced when drafting these: proportionate procedures; top level commitment; risk assessment; due diligence; communication (including training); and monitoring and review. As such, it is not enough for a company to hope that its staff will operate a ship ethically and will not accept or offer bribes based on written guidance; staff must be trained to ensure compliance and, alongside general bribery and corruption, facilitation payments should also be specifically addressed in the policies.
Even though the ship, its master, the managers and owner might have very little if any connection with the UK, charterers and cargo owners may contractually require compliance and it is increasingly common to see charter parties, for instance, which require compliance with the Act, or equivalents such as the US Foreign Corrupt Practices Act.
In September the Criminal Finances Act 2017 will enter into force in the UK. The Act introduces a range of measures dealing with financial crime including the introduction of a new offence of failure to prevent the facilitation of tax evasion. This offence is modelled on the offence committed by a company of "failure to prevent bribery" in the Bribery Act 2010. The new Criminal Finances Act will render corporate bodies liable, in certain circumstances, for the acts of their "associated persons", subject only to a defence relating to having in place reasonable prevention procedures designed to prevent them from facilitating tax evasion.
The view of UK regulators makes it clear that all companies should take a zero tolerance approach to bribery and corruption but would be sympathetic to events where facilitation payments have been made where there was duress, i.e. a risk to life and limb or risk to the health and safety of an individual. However, economic duress, for example the risk of a delay in loading/berthing, would not be regarded as a sufficient excuse. Yet in most cases, it is the threat of delay that is most persuasive and difficult to resist when faced with demands for facilitation payments.
Therefore the general starting point should be that, unless there is an immediate threat to life, limb or the liberty of those onboard, or to the safety of the ship, any demand for a facilitation payment should be resisted. Further, as companies do have a duty to report demands for facilitation payments to the appropriate authorities, it is important to keep the three ‘R’s in mind – resist, record and report.
The burden to resist all forms of bribery is not the master’s alone. Shipowners should provide a clear policy to their masters and crews onboard as to the response to any demand and how to make reports. If shipowners get into a dialogue about whether to pay or not, then such discussions will not be privileged and may be disclosed in any subsequent action. Clearly there will be times when resisting is very difficult and the likely outcome of not providing the payment is very serious. Most prosecutors would not punish those persons put in very difficult and potentially hazardous situations for making a small payment. A prosecutor will be more interested where the manager has not promulgated a policy, or has not trained the master and crew in how to resist payments or no attempt at all is made to resist making a payment despite such policy. This is a risk management issue and it should be treated no differently to any safety related risk – the risk must be considered and mitigating measures put into place by way of clear policies, training and other aids such as CCTV onboard and joint action with other parties to put a stop to this type of demand.
Whether the facilitation payment is successfully resisted or not, it is vital that a full record of the exchange is kept (which may even include CCTV footage if the demand is made onboard) and reported to head office as soon as possible. In this regard it is vital that shipowners effectively educate and train their staff in how to deal with the situations to ensure that they can demonstrate how the anti-bribery policy is complied with onboard and in practice.
The requirement for appropriate policies and procedures has, in many instances, led to some organisations requiring that their policies are also complied with by their counterparties and suppliers. In order to ensure that corruption is challenged at all levels of the contractual chain, industry bodies are now issuing standard form clauses which ensure that all parties to a transaction have an equal obligation to address corrupt activities. For example, the BIMCO anti-corruption clause for both time and voyage charterparties requires both owners and charterers in equal measure to comply with all applicable anti-corruption legislation. We are seeing such clauses much more frequently now.
This shift towards a more collective approach against corruption has led to some stakeholders in the shipping industry adopting a more formal approach to collective action. For example, as part of a wider government-industry collaboration, the UK Chamber of Shipping is compiling a confidential and anonymous list of reports on facilitation payments with a view to identifying problem areas for the UK government to address in its dealings with relevant embassies or high commissions.
The Maritime Anti-Corruption Network (MACN) is another example of a global shipping industry network (made up of shipowners, cargo owners and maritime service providers) whose members are committed to promoting good corporate practice for tackling bribes, facilitation payments and other forms of corruption in conjunction with governments and international organisations with a view to identifying and mitigating the root causes of corruption in the maritime industry.
Since 2011, the expectation was that companies would implement their own policies and procedures to ensure compliance with the Act. However, over the years the increasing mood to challenge and eradicate corruption at all levels has evolved into a more collective, industry-wide approach to anti-bribery practices which is to be welcome. Currently it is the case that many masters in particular trades are faced with demands on a depressingly frequent basis and in such circumstances compliance with the various bribery regulations is difficult. But if payments/gifts have to be made, there is a defence so long as policies are in place to resist, record and report and these are followed as far as practically possible. However, the time has now passed when shipowners and managers can just hope for the best – they should now have clear policies and provide training to support the master in this difficult position. The new offence under the Criminal Finance Act of failing to have procedures in place to prevent tax evasion may well be applicable to grease payments where such have the result of avoiding a charge or fee payable at a port. Charterers should be equally wary – a master might be seen as an associated person and his payment of small payments may result in charterers being found to not have adequate procedures in place to prevent bribery or tax evasion.
Failure to adhere to UK legislation, even for non-UK flagged ships, may open up parties to the risks of employees committing more serious acts of bribery, to pressure from unscrupulous authorities and to commercial pressure if the failure results in a breach of a charterparty or some other agreement. A workable policy can be devised and support provided to prevent such payments if there is a corporate desire to do so – the “tone from the top” is all important in this regard.
Amendments to the laws have passed both Commonwealth Houses of Parliament.
Canadian National Railway Company v BNSF Railway Company adds to recent case law that has seen the Federal Court refuse to issue routine protective orders.