Recently I realized that anti-corruption clauses I have been using for almost four years became outdated. The language of such clauses seemed to me no longer protective enough. The provisions looked not explicitly clear and to the point. They simply did not provide sufficient comfort “in case anything happens”. On the other hand, these old clauses also created difficulties in work. Many local companies still disagree when they see “FCPA” or “foreign anti-corruption laws” or “compliance with Code of Conduct”. It takes time explaining or adjusting the wordings. So, neither protection, nor the comfort is there.
And when was the last time you revised your anti-corruption clauses? Do they provide necessary protection and make negotiation a breeze? It is my belief, that anti-corruption clauses should not be treated as force majeure provisions. The later are rarely read and hardly ever revised.
At a conference last June I joined an interesting discussion about anti-corruption clauses. Someone shared a thought that anti-corruption clauses are mere declarations. No third party would share any details of its corrupt behavior. And no third party ever enforced anti-corruption clauses. In fact, it is true that I was not aware of cases when anti-corruption clauses were practically enforced or cited by the parties, law enforcement authorities or courts. At least in CIS markets.
I think anti-corruption clauses are not only an important element of ensuring your third party does the right thing, but also a protection for a company. These are 5 reasons why you should include anti-corruption clauses to your agreements.
(1) Set the right expectations. Now it is not a problem if one of your managers forgot to tell your vendor that your company can be liable under FCPA. When it is in the contract it will be presumed that he did. Your vendor’s lawyer will definitely notice the clause while reviewing the contract. This may trigger an internal discussion resulting in positive change in practices.
(2) Enhance your culture of zero tolerance. One thing is to have a policy and training. Another thing is when not a single contract gets approval without anti-corruption clauses. This is to show what matters. This is walking the talk.
(3) Grant you audit rights. It depends on the jurisdiction what level of information you can get legally. And it depends on your resources how deep you want to go, if some data is not easily available. Why not to save costs and ask for documents directly from your vendor?
(4) Grant you termination rights. Inclusion of a right to terminate agreement in case of violation of anti-corruption clauses is a must. Otherwise the situation can become a nightmare. This is when you are stuck having a contract with a party undergoing a corruption scandal, suffering reputation damages, and not being able to terminate the contract under a threat of contractual damages.
(5) Grant you possibility to recover damages. This is probably not that easy to enforce in Ukraine. However, such clauses are still better to have than not. In case you contract is subject to more progressive jurisdiction damages recovery provisions are priceless.
A few years back, if you needed anti-corruption clauses you would have to pay a solid fee. The law firm would persuade you that there is no one-size-fits-all solution, so they need to do a lot of work to tailor such clauses to your industry, geography, size of the business. Nowadays quality content is out there in big volumes. It is standardized, saturated with value, and costs nothing. An example would be the anti-corruption clauses circulated recently by Trace International, a non-profit business association that invests resources to provide members with anti-bribery compliance support. Unfortunately now these clauses are not available on their web-site.
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Pavlo is a regional Legal and Compliance Head with a global pharmaceutical company. He leads Legal and Compliance function in CIS & Romania as a part of Emerging Markets business region.
He got his LL.M. degree in International Business Law from Tilburg University, the Netherlands. He also graduated from Ukrainian university with a Master degree in Commercial Law.
Pavlo is an attorney at law admited to Ukrainian Bar, and a certified compliance professional (CCEP-I).