Nigeria: The Foreign Corrupt Practices Act ("FCPA") & UK Bribery Act ("UKBA") Takeaways For Companies Doing Business In Nigeria

Background

For investors looking to do business and companies doing business in Nigeria, there are myriad considerations. Navigating the business landscape without falling foul of the provisions of the UK Bribery Act 2010 (UKBA) and the US Foreign Corrupt Practices Act 1977 (FCPA) should be a key consideration. These laws did not come into force recently, but their application to Nigeria has never been more relevant than now. The present leadership got elected on the promise of rooting out corruption and has pursued its anti-corruption stance with more vigour than any other democratically elected government. On the other hand, the leadership has taken measures to encourage both foreign and domestic investors to do business in the country. 1Exportation of locally made materials has also been encouraged by the government.

This analysis seeks to highlight the offences under the laws and how they can be avoided.

Scope of the Laws

The UK Bribery Act 2010

The Bribery Act was enacted on 8th April 2010 but came into force on 1st June 2011. Its provisions are on offences relating to bribery and for connected purposes.

" The Scope of the Bribery Act

The Bribery Act creates 3 offences:

a. Bribing Another Person: This includes promises and requests for financial or other advantages for the improper performance of a relevant activity.

Activities to which bribery in this context relates must meet two conditions. First, the act must fall into one of the following categories.

• a public nature,
• connected with a business,
• performed in the course of a person's employment or
• any activity performed by or on behalf of a body of persons (whether corporate or unincorporated).

Furthermore, there must be an expectation of good faith and impartiality in the performance of the activity. Also, performance of the activity must put the performer in a position of trust. Any activity that falls into the categories stated above and meets one of the fiduciary conditions in the second test, is a relevant activity under the Act.\

b. Bribing of Foreign Public Officials/Agents of Public International  Organisations: This applies to persons who, with intention to gain advantage, retain or obtain business, offer or give any financial or related advantages to a foreign public official (in his capacity as a public official) where the foreign public official was neither permitted nor required by written law to be so influenced. It does not matter whether the bribery act was done directly or to/through a third party.

c. Failure of Commercial Organisations to Prevent Bribery: This offence is exclusive to commercial organisations (companies and partnerships). It arises where a commercial organisation fails to prevent an associated person (persons who perform services for or on behalf of the commercial organisation) from bribing another person with the intention of obtaining business, or an advantage in the conduct of business, for that commercial organisation. Associated persons as used here include employees, agents, subsidiaries, and partners.

To the extent that this offence does not require proof of intention by the commercial organisation, this is an absolute liability offence. The only defence under the Act is when a commercial organisation proves that it had in place adequate procedures to prevent associated persons from undertaking the relevant corrupt acts.

• The Bribery Act applies to:
  – British citizens, bodies incorporated in the United Kingdom, corporate organisations with a business presence in the UK (whether incorporated in the UK or not). Once a connection is made with the UK by a business, the Act can take effect. Therefore, the act has a broad extra-territorial application as it covers offences in the UK as well as overseas.

The Foreign Corrupt Practices Act 1977

The FCPA was enacted to check the prevalent practice of making illegal payments and bribing foreign public officials by American companies in the seventies. Since then, numerous convictions have been obtained under the Act.

Scope of the FCPA

Basically, the FCPA makes it unlawful for persons to make payments or offer gifts or carry out any act in furtherance of such payments/gifts, directly or indirectly to a foreign official for the purpose of influencing the decision of such official.

The FCPA applies to:

– United States (U.S.) persons (individuals and corporate bodies) :

• foreign non-residents in the US (who carry out acts in furtherance of a corrupt payment)
• Officers, Directors, Employees, Agents, and Stockholders of any of the categories above.

Defences under the FCPA
– Facilitation Payments

• By virtue of Section 78dd-1 (b) the Act provides for an exception to the general rule by stating that any  acilitating or expediting payment to a foreign official, political party, or party official, the purpose of which is
  to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official will not constitute an offence under the Act.

– Lawful Payments

• By virtue of Section 78dd-1 (c) It shall be an affirmative defence to actions under the Act to prove that the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws
  and regulations of the foreign official's, political party official's, or candidate's country. Payments that are lawful under a local country's laws may also serve as a defence under the UKBA.

– Bona fide Expenditure

• They were reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party party official, or candidate and were directly related to the promotion, demonstration, or explanation of products or services; or the execution or performance of a contract with a foreign government or agency thereof.

These persons as stated above are

• The definition in section 8(1) especially in relation to for or on behalf of the relevant commercial organisation. Note that while the UKBA prohibits bribes to foreign officials just like the FCPA it goes further by extending same to bribe perpetrated in a private commercial setting.

What Companies in Nigeria need to Know !

In view of the above, foreign companies and investors looking to do business or carrying out projects in Nigeria either directly or through subsidiaries must balance their activities relative to these laws. An issue which may arise is the status of facilitation payments in Nigeria. Clearly, the definition of facilitation payments under the FCPA covers a common practice in Nigeria. Nonetheless, the line between an intended facilitation payment and a bribe can be thinner than a strand of thread.

For instance, the Code of Conduct for Public Officers2 provides that a public officer shall not put himself in a position where his personal interest conflicts with his duties and responsibilities. 3Public officers are also prohibited from asking for or accepting property or benefits of any kind on account of anything done in discharge of duties.4

Avoiding this pitfall (and others) arising from these laws requires Companies and investors to be proactive in their business operations. Thus, the following action points should be considered or implemented for such investors/Companies operating in the Nigerian environment.

Action Points for Companies

• Utilization of local agents/suppliers with experience and established relationships with the government agencies.
• Compliance training for key personnel of the Companies.
• Compliance checklist to avoid violations must be put in place.
• Effective control measures should be put in place over associated persons and agents. For example, this could include agreements with agents where they undertake to avoid any act that would fall foul of the relevant laws

(FCPA/UKBA). Also, the scope/authority of agents must be clarified before the start of the relationship.

• In-depth due diligence on potential investments and acquisitions. This is relevant to protect the investor from losses arising from the prosecution of the subject of investment for prior acts.
• Enunciation of anti-corruption policies in businesses. Such policies should disallow facilitation payments (in view of the non-recognition of these types of payments under the UKBA). Receipts must be obtained for payments made to the government agencies.

October 30, 2018

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.