Anticorruption is a hot topic in Romania these days. The latest news from the National Anticorruption Direction (“NAD”) shows that corruption affects both the public and the private sector. What will the consequences be? We can only speculate but on the long run, the private companies could end up with a loss of profits, as the field of anticorruption becomes wider and there appears to be a need for anticorruption measures and adequate procedures to fight corruption.
Which are the current trends as regards the corporate anticorruption in Romania?
Currently NAD is highly recognised among the Romanian public due to the high profile criminal investigations, unlike the corporate liability which does not enjoy such high public exposure.
One might argue that the corporate liability for corruption allegations is not a very well known topic in Romania, despite the fact that the corporate liability is highly regulated. This aspect is also ascertained by the Report called Liability of Legal Persons for Corruption in Eastern Europe and Central Asia (the “Report”) 1 , issued in 2015 by OECD Anti-Corruption Network for Eastern Europe and Central Asia Report. Briefly speaking, the Report mentions Romania to be the only country where the liability is established following the analysis of deficiencies in its corporate culture2.
What is the practice abroad as per the trigger of the corporate liability for corruption and the consequences deriving therefrom?
First, it is useful to note the case of Innospec, the world’s last maker of tetraethyl lead3 that admitted bribing officials from Iraqi Ministry of Oil in order to be awarded the contract for toxic fuel additive. Following this corruption scandal, Innospec had to make a $40 million payment to British and American regulators.One would ask himself, why is this important, as many private companies face corruption allegations and have been convicted to this extent?
The novelty in this case is that Jalal Bezee Mejel Al-Gaood & Partner, a Jordan company who took also part in the tender, filled a claim in UK courts alleging that Innospec had been awarded the contract in Iraq as a consequence of engaging in corrupt practices and that following such corrupt practices, it lost business of around $26.5 million. Even if the judge clearly stated that “there was clearly criminal wrongdoing”4 the causality between bribery and the award of the contract in Iraq has not been clearly determined. Thus, the claimant was not awarded the claims it has been requested.
Even if the Jordanian company was not awarded the claims, this opens the box for claims to be made by private companies for loss of business resulting from corrupt practices.
Second, the case of a British company, Sweett Group PLC, convicted in the UK for corruption in the Middle East caused 70 redundancies when it closed down its Middle East and North Africa operation5 , in addition to fines and confiscation being imposed by the judge.
Coming back to Romania, no more than a few months ago, NAD announced that an important Romanian company (the “Company”) is investigated for corruption allegations. What could be the possible outcome of such an investigation?
In case the Company is convicted, various sanctions may be imposed, such as: fines, dissolution; suspension of the activity from 3 months to 3 years, or suspension of one of the activities related to the offence committed; closing of a workstation from 3 months to 3 years; ban on the participation to public procurement procedures for a period from 1 to 3 years; placement under judicial supervision; publication of the conviction decision . In addition, the liability of the management team as natural persons will be triggered, as per the relevant provisions of the Romanian legislation.
Coming back to Romania, no more than a few months ago, NAD announced that an important Romanian company (the “Company”) is investigated for corruption allegations. What could be the possible outcome of such an investigation?
In case the Company is convicted, various sanctions may be imposed, such as: fines, dissolution; suspension of the activity from 3 months to 3 years, or suspension of one of the activities related to the offence committed; closing of a workstation from 3 months to 3 years; ban on the participation to public procurement procedures for a period from 1 to 3 years; placement under judicial supervision; publication of the conviction decision 6. In addition, the liability of the management team as natural persons will be triggered, as per the relevant provisions of the Romanian legislation.
Moreover, it is possible for a company in a similar situation to be put on a “black list” and may itself lose business in Romania and abroad in the context of global business.
Without going into details as regards the development of this case, we are of the view that a similar case could be avoided in the future if companies were to pay a special focus on the measures to prevent corrupt practices, which opens the door for creating a cleaner and safer business environment.
What is to be done to ensure a cleaner business environment on the long run?
(I) It is advisable that an adequate anti-bribery policy is implemented, by adopting prevention measures against corrupt practices. Such policy should comprise among others:
- a top level commitment, under the form of a declaration given by the board of directors or any other equivalent body/person, stating that the culture of the organisation does not accept any form of bribery.
- various risk assessment procedures which are drafted and implemented in accordance both with the dimension of the company and with the type, size and location of its activities and/ or services performed.7
- a clear whistle-blower policy in place and encourage the self-reporting.
(II) Trainings of employees should be organised with a view of informing and expanding the anti-bribery policy, followed by frequent monitoring and report.
(III) Companies should implement integrity standards together with the measures described by the Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups, even if the respective company does not fall within the requirements imposed by this act.
(IV) Last but not least, consideration should be paid to including in the contracts anti-bribery clauses, the infringement of which might attract the automatic termination thereof, with no other formalities being necessary to this extent. Nevertheless, practical aspects regarding the enforcement thereof should be considered.
Based on the above, it is obvious that corporate liability is a reality in Romania with consequences which may derive therefrom, including the theoretical possibility for a company to make successful claims for loss of profit deriving from corrupt practices.
Corrupt practices have many faces and thus it is recommended that each company adopt clear prevention measures, which should be communicated “de facto” to its employees. These measures would diminish the risk of triggering its liability and/ or the liability of the management body.
1 https://www.oecd.org/corruption/ACN-Liability-of-Legal-Persons-2015.pdf
2 https://www.oecd.org/corruption/ACN-Liability-of-Legal-Persons-2015.pdf, page 22
3 http://vannin.com/news/pdfs/times-october13.pdf
4 Jalal Bezee Mejel Al-Gaood & Partner and Future Agencies Company Limited v Innospec Limited, Innospec Inc and David Turner (2014).
5 press reports in the Financial Times & the Shropshire Star
6 Romanian Criminal Code
7 https://www.transparency.org.uk/publications/diagnosing-bribery-risk/