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Huzaima Bukhari, Dr. Ikramul Haq & Abdul Rauf Shakoori
Corporations around the world use bribery and other unethical behaviors to generate business from local and foreign markets. These methods create barriers for other entrants and are perilous for fair business practices and against the idea of free markets. Such activities are undertaken to secure certain kinds of business which may be impossible or even illegal to obtain otherwise. It is observed that in most of the cases the authority to grant approvals to do a business rests in the hands of politicians in power and government officials. Companies around the world resort to financial misconduct by extending incentives to influence foreign officials.
Due to development in technology, the footprints of modern businesses are spread across the globe. Hence, to combat this malpractice, the governments, global regulators and non-governmental organisation (NGOs) are proactive now as compared to the past era, keeping in view the examples of Watergate Scandal and Lockheed Scandal, where foreign officials were paid bribe to get benefits. These malpractices led U.S authority to introduce regulations that declare bribing foreign public officials as a criminal offence and finally, United States was the first country to introduce Foreign Corrupt Practices Act in 1977 [FCPA]. Subsequently, due to global influence of corporate culture, the Organization for Economic Co-Operation and Development (OECD) introduced Anti-Bribery Convention for Foreign Public Officials in 1999.
The above-mentioned Convention requires its member countries to align their anti-bribery legislations with the requirements of the conventions. Though each country is independent to frame laws as per their requirements, however, the convention demands that each member state incorporate the objective of the legislation which will prohibit all types of offers, promises or giving monetary and other unfair advantages. Each member state must ensure that this prohibition will not be limited to tangibles or intangibles and cash. It must have a broad scope where all kinds of payments, whether direct or indirect or whether involving any agents would fall under the definition of prohibition. Similarly, the convention also requires that legislation should include the definition of the recipients who are foreign public officials and/or employees and purpose of the payments which strictly prohibit that any payment made to public officials to obtain or maintain a commercial relationship would be punishable.
The theme of the convention appears to be the same as introduced in the first legislation of 1977 and it prohibits any type of payment to public officials, this law also prohibits improper payments to, or other improper transactions with, non-U.S. officials to influence the performance of their official duties.
In general, the anti-bribery provisions of the FCPA prohibit giving, paying, promising, offering, or authorizing the payment of anything of value, directly or indirectly through a third party, to any “foreign official”—a term that is very broadly defined—to obtain or keep business or to secure some other improper advantage. The law offers both criminal and civil penalties to those in violation and which is aggressively enforced by the U.S. Department of Justice and the Securities and Exchange Commission. Criminal penalties are also given in the FCPA for willful violations of the books and records provided by an individual or a company. Under alternative sentencing provisions, those penalties can be increased significantly.
Due to strict legislation and its implementation, a company can suffer serious consequences even if it is not convicted—mere indictment under the FCPA may trigger significant sanctions, such as debarment from government contracts. Moreover, FCPA prosecutions often include charges of other criminal violations, such as mail and wire fraud, money laundering, and conspiracy, and may lead to civil claims against the company. These violations can trigger investigations by non-U.S. governments, with the risk of penalties under local laws and loss of goodwill.
Similarly, UK Bribery Act 2010 [UK Bribery Act], is stricter than the FCPA. This law comprehensively defines the criminal offences of bribery and includes the principal offences of bribing another person, being bribed, and bribing a foreign public official. Similarly it bars all types of facilitation payments to foreign officials. The offence of bribing another person includes offering, promising, or giving a financial or other advantage intending to induce or reward improper conduct, or knowing or believing that its acceptance amounts to improper conduct. The U.K. Bribery Act has both criminal and civil penalties applicable to both corporations and individual employees. The maximum penalty for an individual convicted of bribery under the Act is 10 years’ imprisonment, with an unlimited fine. A corporation convicted of bribery under the U.K. Bribery Act can be subject to an unlimited fine. Additionally, the company may be debarred from competing for public contracts.
If we scroll through the relevant provisions of Turkish law, we find that the Turkish Criminal Code penalizes individuals and public officials involved in corrupt practices, which can lead to imprisonment of 4 years to 12 years, Termination of an employment contract, prohibition from participating in public tenders and termination of public procurement agreement and security measures for individuals (e.g., prohibition on conducting public service, confiscation of bribe). In the case of corporations, Article 253 of the Turkish Criminal Code applies. Any legal entity that obtains a benefit by committing the offense of bribery is subject to security measures which may be revocation of license/permit or confiscation of property or material interests.
Recent trends show that countries around the globe have started understanding the gravity of the matter and introducing legislations to combat commercial bribery which ultimately leads to political corruption. Recently, Malaysian Government implemented Malaysian Anti-Corruption Commission Act, 2020—it was enacted in 2018 but came into force in June 2020. By virtue of section 17A of this law, the managers and senior officials of the commercial organization and their officials are made personally liable for any undue payments. The law discourages ignorance as a tool of defense and also requires implementation of adequate procedure highlighted in the guidelines issued by the Malaysian Prime Minister’s Department regarding acceptable framework on anti-corruption policies and procedures.
The incumbent Prime Minister, Imran Khan, came into the power with the slogan of elimination of corruption, however, in a recent corruption perception index Pakistan was ranked at 124 out of 180 countries, shedding 4 points as compared to previous rating. Even after three years in power, neither any major legislation in this direction has been introduced, nor any institutional reforms undertaken. The most disturbing part is that Pakistan is not a signatory of the OECD’s Anti-Bribery Convention. Moreover, we do not have comprehensive legislation on anti-bribery that meets the global standards. The existing anti-corruption laws both at federal and provincial level need extensive revisions to address the global challenges.
Similarly, our law enforcement agencies such as Anti-Corruption Department, National Accountability Bureau (NAB), Federal Investigation Agency (FIA) and the lower judiciary, lack technical skills, understanding plus reputational issues as majority of the Pakistanis do not trust their actions. These facts are corroborated by reports published by different international institutions regarding the role of our judiciary. The Asia Pacific Mutual Evaluation Report, 2019 mentions the lack of understanding on judiciary’s part and highlighted concerns of companies and citizens of Pakistan regarding judiciary.
The World Justice Project (WJP) listed our judiciary at the bottom performing countries and now most recently, the U.S State Department in its report on “2020 Investment Climate Statements: Pakistan” painted a shocking picture of our judiciary which is not only excruciating but also demands introspection. The important question is: Why after having full support from all the stakeholders, parliament, public, civil society, judicial pronouncements are allegedly subjective and controversial/compromised? Why all the well-reputed organizations and watchdogs are always skeptical of their role and their assessment about our judicial system that always brings more and more embarrassment globally? It is pertinently important to mention that Foreign Minister of Pakistan on July 27, 2021 declared the US State Department report not objective and insisted that “courts are free in Pakistan. Notwithstanding the rejection of report by our government, the fact remains that judiciary under the Constitution of Islamic Republic of Pakistan [“the Constitution] has unfettered autonomy. It is about time that this important institution should demonstrate its independence as envisaged in the Constitution and complete disassociation from the corridors of power.
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Huzaima Bukhari & Dr. Ikramul Haq, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE). Abdul Rauf Shakoori is a corporate lawyer based in the USA and an expert in ‘White Collar Crimes and Sanctions Compliance’. They have recently coauthored a book, Pakistan Tackling FATF: Challenges and Solutions.