ENERGY BRIEFINGS SERIES 2011 OIL AND GAS
UK BRIBERY ACT
The Energy Institute in partnership with Deloitte is pleased to introduce the fifth in a series of Energy Briefings designed to provide
insightful analysis into key issues within the UK energy industry. The Energy Briefings Series will offer expertise and market
intelligence, which we trust, will become a valuable source of information.
On 8 April 2010, the UK Bribery Act,
reputed to be among the most
stringent anti-corruption legislation in
the world became law and is scheduled
to come into force on 1 July 2011. The
implications for the oil and gas sector
are significant and wide ranging.
The Bribery Act contains provisions
making it illegal to bribe private
individuals as well as government
officials and perhaps most significantly
for corporates, a new offence of failing
to prevent bribery. Under this provision
the Act holds a company liable for the
acts of its employees, agents and other
associated third parties without the
need to show knowledge or complicity
on the part of the company. In other
words, companies may be on the hook
for the actions of an agent or employee
in a foreign country the occurrence of
which the company is simply not aware.
1 authorities for a combined amount of
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Implications for the oil and gas industry
Oil and gas a natural focus
for prosecutors
The characteristics of the oil and gas
industry make it a natural focus for
enforcement authorities, for example:
• Natural resources are often located in
countries with a high propensity for
corruption. For example Venezuela,
Russia, Guinea, Democratic Republic
of Congo, Nigeria and Kazakhstan all
scored less than 2.9 on Transparency
International’s corruption perceptions
index in 2010. The UK, by contrast,
scored 7.6.
• In many of these countries, oil and
gas producers have little choice but
to team with state owned oil
companies or other government
influenced entities.
• The nature of operations requires
that high value equipment and
personnel are required to quickly
clear customs and immigration
procedures.
Some of the largest fines globally
have related to the activities of oil and
gas companies. In one oil and gas
related enforcement action a number
of defendant companies and individuals
have to date settled with the US
$1.4 billion in fines and penalties in
connection with bribes paid in relation
to the operation of the Bonny Island
liquefied natural gas plant in Nigeria.
This trend is only likely to continue
upwards as the number of countries
active in enforcement increases. Nigeria
and Russia for example have both
recently brought corruption related
enforcement actions. In addition,
cooperation between enforcement
authorities is increasing which means
that investigations can be conducted
more quickly and easily than was
possible in the past.
Provisions of the Bribery Act
The Bribery Act contains:
• Two general offences of (i) offering,
promising or giving a bribe and (ii)
requesting, agreeing to receive or
accepting a bribe.
• A new specific offence covering
bribery of a foreign public official for
which the burden of proof is
apparently lower than the general
offence.
• Most importantly for companies, a
new corporate offence of failing to
prevent a bribe being made on their
behalf by an ‘associated’ person.
An ‘associated’ person is defined in the
Act as one who performs services on
behalf of a commercial organisation.
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The Act gives the examples of
employees, agents and subsidiaries. The
definition in the Act is sufficiently
broad, however that the possibility of
other third party representatives and
business partners satisfying the
definition of associated persons is high.
Companies need to ensure therefore
that they have appropriate procedures
in place to monitor and control the
activities of all potentially associated
parties whose actions could give rise to
liability for the company under the Act.
Examples of such associated parties
could include joint venture partners and
distributors as well as those referred to
in the Act.
Defence of ‘adequate procedures’
The only defence available to companies
charged with the corporate offence
is to demonstrate that they have
‘adequate procedures’ in place to
prevent bribery. The Ministry of Justice
published final guidance on what
constitutes ‘adequate procedures’
(“the guidance”) on 30 March 2011,
but these are principles-based rather
than prescriptive and intended to be
flexible and outcomes focused.
The six principles contained in the
guidance as to what constitutes
adequate procedures are as follows:
• Proportionate procedures – an
organisation should have
anti-bribery and corruption
procedures that are proportionate
to the specific risks faced by the
business and to the nature, scale
and complexity of its operations.
• Top level commitment – senior
management should demonstrate
their commitment to preventing
bribery, establish a culture that
supports this commitment and
communicate the company's
anti-bribery policy throughout
the organisation.
• Risk assessment – the company
should perform a regular and
comprehensive assessment of the
nature and extent of its corruption
risks.
• Due diligence – the company
should understand the background
and reputation of the parties with
whom it does business.
• Communication (including training)
– the company's anti-bribery policies
should be effectively embedded in
day to day business processes.
• Monitoring and review – the company
should implement appropriate
monitoring and review mechanisms
to ensure compliance with relevant
policies and procedures.
 ENERGY BRIEFINGS SERIES 2011 OIL AND GAS

UK BRIBERY ACT Implications for the oil and gas industry

The guidance does not provide a “one US Foreign Corrupt Practices Act Current compliance programmes with the highest corruption risk may
size fits all” solution, and companies (“FCPA”) tailored to the FCPA will therefore have not necessarily correspond with the Contact us
will have to interpret and apply the In many regards the provisions of the to be revisited in order to ensure they largest operations of the company in To discuss any of the issues raised
principles as appropriate to the size, Bribery Act are wider than the FCPA, US satisfy the requirements of the Bribery revenue terms. above, please feel free to contact us.
complexity and nature of their business legislation to which many companies Act. With regard to the issue of
operations. As the guidance suggests, in the oil and gas industry are already facilitation payments while the Act does While the Ministry of Justice has
a risk-based approach is vital to subject. In particular, the Bribery Act not contain a specific “carve out”, the indicated that a company that is listed Carl Hughes
ensure that resources are directed at prohibits: guidance does refer to a defence under in the UK but otherwise does not UK Head – Energy, Infrastructure
those areas where problems are most common law where the loss of life, conduct business in the UK is unlikely to and Utilities
likely to arise, and to ensure that (1) bribes paid to private individuals as limb or liberty are an issue. Joint be subject to the Act, it is unclear how t: +44 (0)20 7007 0858
implementation can be performed in well as government officials, prosecutorial guidance issued by the “business” is defined in this context. e: cdhughes@deloitte.co.uk
an expeditious and efficient manner. (2) facilitation or “grease” payments Serious Fraud Office and the Director of The US authorities have taken an
The Serious Fraud Office and Director Public Prosecutions however merely expansive view of their jurisdictional
and Don Kinnersley
of Public Prosecutions have also reinforces the fact that facilitation reach and the UK authorities might be
published guidance to prosecutors (3) does not include an exemption for payments are outlawed. expected to take a similar approach in Head of Business Development
which in large measure echoes the delegation trips by foreign order to “level the playing field” for UK t: +44 (0)20 7007 0693
Ministry of Justice guidance. government officials. Hospitality and entertainment domestic companies. e: dmkinnersley@deloitte.co.uk
The Government states in the guidance
its intention not to prohibit reasonable Conclusion
What will enforcement authorities expect of “adequate” procedures? and proportionate hospitality and The implications of the Bribery Act are Peter Maher
In our experience in situations where corrupt payments are discovered to have promotional expenditure intended to on their face challenging for many Partner
been made by employees, representatives or business partners of a company, improve the image of a commercial companies in the oil and gas industry. It Forensics and Dispute Consulting
among the key questions asked of the company by enforcement authorities are: organisation, better to present products should be recognised however that Tel: +44 (0) 20 7303 3180
and services or establish cordial typically many of the controls required pfmaher@deloitte.co.uk
• Did the company effectively diligence the employee, representative or business relations. It is clear from guidance that in an effective Bribery Act compliance
partner prior to retention in order to identify any historic issues or other for an offence to be committed the programme will already be in place,
corruption red flags? provision of hospitality and entertainment and the process of implementation will Gareth Parkes
• Did the company effectively communicate to the employee, representative or must be made with the intent of be one of refocus and refinement Energy Institute
business partner that it was company policy that bribes should not be offered inducing the recipient to act improperly. rather than reconstruction. Key to Tel: +44 (0) 20 7467 7131
or paid on its behalf? In this regard the guidance has implementing a successful programme gparkes@energyyinst.org
• Did the company evidence their understanding and acceptance of these terms provided significantly more clarity to is the performance of an effective risk
by the employee, representative or business partner? this area than was previously the case. assessment at the beginning of the
• Did the company effectively control and monitor the activities of the employee, exercise to ensure that all genuinely
representative or business partner to ensure compliance with the policy? Extraterritorial reach high risk areas are identified and that
The extraterritorial nature of the resources are focused on those areas.
These questions can be used as a useful benchmark by management when Bribery Act means that UK companies
considering the adequacy of their procedures. or companies with operations in
the UK will have to maintain
anti-corruption procedures that satisfy
the requirements of the Act wherever
2 they operate in the world. It should be
noted that the countries and operations

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