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Policy & Implementation

Summary of Ethic Laws and Codes

  1. The US Foreign Corrupt Practices Act ("FCPA") International Power (IPR) is legally bound to comply with this because of our New York Stock Exchange listing. The FCPA criminalizes the bribery of foreign officials anywhere in the world for the purpose of influencing an official decision to obtain a business benefit. It also requires relevant companies (which includes us) to meet certain standards regarding their accounting practices, books and records and internal controls. The antibribery provisions prohibit IPR (including IPR Personnel, agents or shareholders) acting on its own behalf or any other person (which would include eg another IPR Group company) from committing an act in order to obtain or retain business or to direct business to any other person through:
    1. a payment, offer, promise to pay or authorization of a payment, promise or offer;
    2. of money or anything of value;
    3. to (a) any foreign official (which includes any employee or officer of a public international organisation); (b) any foreign political party or party official; (c) any candidate for foreign political office; or (d) any other person while "knowing" that the payment or promise to pay will be passed on to one of the above;
    4. "corruptly";
    5. for the purpose of (a) influencing an official act or decision of that person; (b) inducing that person to do or omit to do any act in violation of his/her lawful duty; (c) inducing that person to use his/her influence with a foreign government to affect any government act or decision; or (d) securing any improper advantage.
    A company is deemed to have knowledge if it is aware of but consciously disregards a high probability that the payment or offer of payment will be made (eg by an agent or contractor). Breach of the FCPA carries very severe criminal and civil penalties (eg criminal penalties for individuals of fines up to £100,000 and/or imprisonment for up to 5 years; fines for companies up to $2m or twice the gross gain/loss resulting from the corrupt act). Also, collateral sanctions can be (and have been) applied. The US Justice Department (responsible for enforcement of the FCPA criminal provisions) has established a number of "red flags" (alerts of probable corrupt practices). One of these is the payment of excessive commission to agents. See paragraph B1 (c) of the Code of Business Policies. FCPA "books and records" provisions. We are required to make and keep books and records "which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of" our assets. These records must be kept in "such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs". The FCPA requires internal accounting controls that "provide reasonable assurance that … transactions are executed in accordance with the management's general or specific authorization". These obligations extend to wholly or majority owned affiliates. (Most prosecutions under the FCPA have been brought under the "books and records" provisions as they are easier to prove than the antibribery provisions).
  2. The Anti-Terrorism, Crime and Security Act 2001 (the Act) On 14th February 2002 the UK government brought into force Part 12 of the Act which addresses the issue of corruption overseas. It has long been an offence to offer or make corrupt payments in the UK. The Act now gives the UK courts jurisdiction over crimes of corruption committed overseas by UK nationals and companies; and it puts beyond doubt that the existing offences of corruption apply to bribery of foreign public officials and foreign “agents”. Thus it is now a criminal offence for a UK company or national to commit an act of corruption in relation to an overseas public official or commercial agent, even if all the acts constituting the crime take place overseas. The penalties are an unlimited fine and/or seven years in prison. The Act does not apply to non-UK subsidiaries of a UK company. There is no single easy definition of what constitutes bribery and corruption in the Act. However, Trade Partners UK (a governmental organisation) gives a definition of bribery as follows: “Bribery can be defined broadly as the receiving or offering of an undue reward by or to any holder of public office or private employee designed to influence them in the exercise of their duty, and to incline them to act contrary to the known rules of honesty and integrity”. Thus any payment, of offer of payment (whether in money or in kind) to a person or company overseas with a view to influencing that person’s decisions or actions or securing an improper commercial advantage would constitute a criminal offence in the UK. The Act is more far reaching than the FCPA in two key aspects. Firstly, the FCPA is concerned with the corruption of a “foreign official, political party or candidate”. The UK Act, on the other hand, concerns the corruption of public officials and commercial agents. An “agent” is a broad definition and is essentially any person who is employed by or performs functions for another person. Under UK law it is therefore a criminal offence to offer a corrupt payment to a private person or company overseas that has no connection with the government or any state entity. Secondly, the FCPA has a limited exception with regard to what are commonly termed “facilitation payments”. Facilitation payments are insubstantial payments made merely to facilitate or expedite the performance of “routine governmental action”. Examples of routine governmental action might include clearing goods through customs, expediting the processing of permits, providing police protection, mail pick-up and delivery and scheduling inspections associated with contract performance. The reason for this is that the US Congress took the view that, in some countries, facilitation payments are simply an unfortunate fact of business life. However, the Act contains no exceptions for facilitation payments; under UK law, facilitation payments are therefore illegal. The government was unable to find a reason why facilitation payments should be distinguished from larger and more obvious bribes. However, as a matter of unofficial guidance, Trade Partners states that: “We do not envisage any circumstances in which the making of a small “facilitation” payment, extorted by a foreign official in countries where this is normal practice, would of itself give rise to prosecution in the UK”. This guidance should be treated with caution as it contradicts the language of the Act and has not been tested in the courts.
  3. OECD Anti-Bribery Convention The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions entered into force on 15 February 1999, following ratification by the requisite number of states. Amongst the countries which have enacted implementing legislation are Australia, Belgium, Canada, Germany, Greece and the US. The Czech Republic, France, Italy, The Netherlands, Poland, Portugal, Spain and Switzerland are in the course of implementing legislation. The UK has ratified the Convention and believes its existing laws meet the requirements of the Convention. The Convention adopts a wider definition of bribery than the FCPA eg prohibiting bribes to foreign officials not only to "obtain or retain business" but also to secure any "other improper advantage". It also includes accounting provisions similar to the FCPA "books and records" provisions.
  4. Council of Europe Convention The 40 member states of the Council of Europe and 8 observer states (including the US) approved the Criminal Law Convention on Corruption, which was adopted by the Council of Ministers in November 1998. This has not yet entered into force. The Convention adopts a very broad notion of corruption, including active and passive domestic bribery of all sorts of officials, transnational bribes and the bribery of private persons in a commercial context, as well as "trading in influence" and includes accounting offences connected with corruption offences. Once implemented, criminal and civil penalties will apply. The Convention also provides for the right (by 3rd parties) to bring civil proceedings to obtain compensation for all damage suffered (pecuniary damage, loss of earnings and non-pecuniary damage).
  5. The World Trade Organisation The WTO has established a working group to research transparency in the government procurement process.
  6. International Chamber of Commerce ("ICC") The ICC has drawn up rules outlining recommendations for government action to curb corrupt practices through strengthening domestic laws, enhancing enforcement of anti-corruption laws and increasing transparency. The ICC rules provide that no bribes may be given to, or received by, business enterprises; no kickbacks are allowed and no unreasonably high payments may be made to agents. These rules extend to corruption in private business transactions as well as to bribery of public officials.
  7. European Union Following the 1995 Treaty on the Protection of Financial Interests of the Community, the EU has adopted the First Protocol of 1996 (concerning the criminalization of bribery within the EU) and the 1997 Convention on Bribery. These instruments are currently being ratified and implemented. The EU also intends to regulate private to private corruption in a commercial context.
  8. The World Bank and the European Commission The World Bank has guidelines which debar from future World Bank financed projects any firm and consultant found to have engaged in any corrupt or fraudulent practices. It does not require a court conviction to debar. The European Commission is reviewing a proposal for a new Procurement Directive “Blacklisting” companies found guilty of corruption from tendering for public procurement contracts in the EU.

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