South African businesses with associate links to UK corporations – or who are represented by agents in their dealings with such companies – need to be aware of the potential implications of the UK Bribery Act on a business transaction relating to donations and charities.
Dave Loxton, director and Forensics Practice head at Werksmans Attorneys, says that while there is no case law from which to draw legal precedents in this area, the Act will impact South African companies "associated" with UK companies.
"An agent acting on behalf of a particular UK company would also fall under the ambit of the Act," Loxton explains.
He cites the case study of an exporter who sends a representative to a foreign country to discuss supplying a new strain of seed to a local farming co-op. In this meeting, the head of the co-op tells the representative that there is a scarcity of anti-retroviral drugs in the face of a high local HIV infection rate.
In a subsequent meeting an official of the co-op suggests to the representative that the exporter could pay for the necessary anti-retroviral drugs. He says that this would be a very positive factor for the government in considering whether or not to grant a licence to import the seeds.
Says Loxton: "Hidden in that particular proposal is the inferred undertaking that if the company pays to help solve that country's Aids problem, they will be given the licence."
In a further meeting, the same official indicates that the company should donate money to a certain charity, which would purchase and distribute the drugs.
Loxton says, "clearly this is a potential bribery risk".
He adds: "The UK legislation is fairly wide-ranging in that it does provide for allowances to be made for the effect of local legislation in jurisdictions where a business transaction relating to donors or charities is taking place.
"So where the local legislation requires government involvement and, for example, payment for - or shared costs of - corporations doing business in that particular country, then it will not fall foul of the UK legislation," says Loxton.
"But this is a very grey area. A charity such as the one in this case study could well be a slush fund for government officials and the money could find its way into the hands of the wrong people.
"And where the local legislation provides for facilitation payments, but it is clear from the nature of the business transaction that such payments are not in fact facilitation payments, then the UK legislation will kick in."
Loxton emphasises: "Corporations must implement measures to mitigate their risks. In this case, these could include a proper due diligence of the official, as well as an investigation of that particular country and its approach to corruption.
"It would be important to have a clause in the sales agreement terminating the relationship the moment there are any inklings of corrupt payments. There should also be a contractual allowance to chase the funds or follow the payment of monies."
He says that the role of a legal advisor in such instances would be to advise clients on compliance and the possible legal risks of falling foul of the act.
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