Worldwide: Facilitation Payments – Bribery In Vietnam Risks High Penalties Worldwide

Unsuspecting companies are in fact opening themselves up to substantial risk and penalties in multiple jurisdictions for activities in Vietnam that some consider routine or customary. Anti-corruption laws in the United States, United Kingdom, Japan and other jurisdictions have broad extraterritorial reach and can apply to  conduct in Vietnam. Besides large-scale corruption as in the recent cases where Marubeni Corporation agreed to pay $88 million in fines in the U.S. for bribing Indonesian officials through outside consultants and the roughly $800,000 in alleged bribes in the Japan Transport Consultants, Inc. railway case in Vietnam, investors should also be beware of small payments or gifts offered to government officials to "facilitate" (speed up) existing procedures.

In Vietnam, an undeveloped rule of law, broad discretion for local authorities to interpret the law, and low-paid public employees, provide a fertile ground for corruption. Bureaucrats may expect "informal charges" for establishing a local company and for the processing of all sorts of licenses. However, international investors should not yield to the temptation of speedy or favorable processing at the risk damaging the company's reputation, giving rise to high fines, and barring them from participation in future public procurement projects.

Facilitation payments are not necessarily given directly but are often forwarded through agents, including consultants or custom brokers. Even such indirect payments of small amounts can put the applicants at risk of breaking the law. Article 1 of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (link) provides that "it is a criminal offence . . . for any person intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official . . . in order to obtain or retain business or other improper advantage in the conduct of international business." 40 countries have ratified the Convention, including the U.S., EU members, and Japan. The OECD recommends that countries and companies prohibit or at least discourage facilitation payments.

Whether facilitation payments are unlawful depends on the local anti-corruption laws. For example, under the U.S. Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. ("FCPA"), facilitation payments may fall under a narrowly construed exception for "routine governmental action", while they are clearly illegal under UK bribery legislation. The UK Bribery Act of 2010 does not only apply to foreign officials as the receivers, but to bribes to private persons (and failure by commercial organizations to prevent such conduct!). In Japan, the Ministry of Economy, Trade and Industry's guiding regulation on the Unfair Competition Prevention Act explicitly states that even a small facilitation payment can constitute a crime. Under Vietnamese law, facilitation payments are considered criminal, unless they are paid on certain occasions, such as a wedding or sick visit; do not exceed VND 500,000 (less than $25); and are not paid in connection with an ongoing matter or administrative procedure.

As the written laws of the foreign official's country are an affirmative defense under the FCPA, payments made in compliance with Vietnamese law may not be necessarily be illegal. However, one should still be careful in Vietnam, as the death penalty applies to the receiver of a bribe of VND 2,000,000,000 (less than $100,000) or more with life sentence to the giver.

U.S. and UK jurisdiction are notable for their broad extraterritorial reach and high monetary penalties. The FCPA and UK Bribery Act apply not only to local companies or residents but also to certain foreign companies. Besides listing securities in the U.S., other contacts with the U.S. can establish jurisdiction under the FCPA, such as the use of the U.S. postal or banking network or acting as an agent of a U.S. entity. In addition to prison terms of up to 5 years (FCPA) and 10 years (UK Bribery Act) for individuals, penalties can include criminal fines of twice the gain or twice the loss as well as disgorgement. In the Siemens case, those penalties amounted to $800 million in the U.S. in addition to charges in Germany.

Bribes can include "anything of value" (FCPA); they do not need to be monetary payments, and can include gifts and offers or promises. In Vietnam, as in the U.S. and other jurisdiction, as long as there exists an intention to influence an official, the actual amount involved to trigger criminal charges is irrelevant.

Pro-active compliance training and regularly updated procedures, such as a compliance manual, are key to limiting risks for companies doing business in Vietnam and other countries where facilitation payments appear to be common practice. Having "adequate procedures" in place can be a defense against "failure to prevent" under the UK Bribery Act. Particular care should be given to the selection of agents and other self-proclaimed "consultants". Appropriate agreements to prevent corruption should be signed with such agents. In addition, companies seeking to acquire Vietnamese businesses are advised to conduct due diligence with regard to anti-corruption issues to avoid successor liability.

As multinational corporations face jurisdiction under worldwide anticorruption laws, only a zero-tolerance policy can provide a workable solution. In some countries bribes are so common place that such policy may be ridiculed as unrealistic. However, compliant companies which are active across borders should raise awareness among their employees and business partners and avoid exposing themselves to prosecution in multiple jurisdictions.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.

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