Contracting with intermediaries and agents, providing corporate hospitality, giving charitable donations, hiring employees, dealing with State-owned enterprises, commencing operations abroad, or just carrying on daily business, all raise anti-corruption risks.
What does the Index say?
Transparency International recently released its Corruption Perceptions Index 2022[1] (Index) and for the sixth year running the top seven (7) countries (in order) are:
- Denmark (1);
- Finland (2);
- New Zealand (2);
- Norway (4);
- Singapore (5);
- Sweden (5); and
- Switzerland (7).
Australia is the next highest ranked Asia Pacific nation at thirteen (13) while Hong Kong comes in at twelve (12), jumping up two (2) places since 2018.
The Index, which ranks 180 countries and territories by the perceived levels of public sector corruption according to experts and businesspeople, uses a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean.
Corruption across jurisdictions
What constitutes corruption varies from country to country. Most Indo-Pacific jurisdictions have their own legislation and enforcement regimes, and these variations must be considered, and not disregarded when adopting internal policies. Compliance with the local laws of the countries in which businesses operate is equally important as compliance with extraterritorial laws, such as Australia’s Criminal Code (Cth), the US’s Foreign Corrupt Practices Act of 1977 and the UK’s Bribery Act 2010.
Generally, under these laws, the bribery of local and foreign public officials, embezzlement, abuse of function and laundering of the proceeds of crime are criminalised.
If your policy does not include local standards, then you run the risk of triggering an enforcement action locally, possibly supported by the International Anti-Corruption Coordination Centre, which not only carries the risk of penalties but reputational and brand damage as well.
Thinking about business conduct
What do you do if you are establishing your business in a foreign jurisdiction and local law mandates a local partner must have a stake in that business? What level of due diligence is required on a proposed partner’s past conduct?
What about if you find that an agreement which is inherited as part of a takeover or merger seems to involve unusually high fees? Or your company proposes to appoint a local distributor with a licence to use your brand as well? Do you need to include provisions in distribution agreements with agents in the Indo-Pacific region, which forbid certain conduct which are contrary to foreign corrupt practices type legislation in the US, the UK and Australia? What about including provisions which specifically cover local provisions on corruption?
Perhaps a locally based person has asked for a reward to expedite a regulatory approval, or asks that a family member be employed in the local business before releasing a company’s goods from a bonded warehouse?
What if a local agent proposes to arrange a private dinner meeting with the Minister while your company’s tender is being considered by that Minister’s department?
What can we do to help?
ANDE + Co. is a next generation Australian law firm with a clear understanding of what we offer clients.
We assist with Australian corporate and commercial transactions. We also specialise in assisting businesses entering, or operating in, the emerging markets within the Pacific, and South East Asian region.
We understand the risks when a business ventures offshore to operate in another market.
We have extensive expertise undertaking due diligence exercises for clients wishing to invest, or establish operations in Australia, the Pacific, and South East Asian region.
We advise on all aspects of international trade and investment, including the impact of free trade and investment agreements. We also advise on international arbitration cases (treaty based ISDS cases) initiated by investors against States under international investment agreements (IIAs).
Most jurisdictions in the Pacific and South East Asia have some form of foreign currency control, and we advise on your compliance obligations so that you can remit funds when it is required.
And we work with your tax advisors to ensure that you know the tax consequences (or approvals) which are going to impact on profits, remittances of capital or dividends from your offshore operations before you enter the market.
Disclaimer
The information contained in this article is provided as a general guide only and is not intended as specific advice. Information contained in this article may have changed or may no longer be current.