"Bribery and Corruption in the Construction

Industry: Challenges for International

Construction and Engineering Projects,"
Construction Law Journal, 2013
February 2013
Attorney Articles
1. Introduction
Bribery and corruption have long pervaded the construction industry. The topic is regarded by
many as synonymous with construction and engineering projects.1 However, the procurement
and completion of such projects demands interaction between the participants; it involves a
certain level of cooperation in order to coordinate the numerous activities which make up the
construction process. The balance between activities which legally facilitate this process and
those which are tainted by concepts of bribery, or corruption is not always clear.
The scale and complexity of many construction projects, together with the number of parties
participating, the geographic locations where they are performed and the legal systems to which
they are exposed can make them especially prone to bribery and corruption. Activities in certain
cultural circles, which might be regarded as essential to getting the job done, and a lawful means
of doing so, may well be seen elsewhere as dishonest, or unlawful. It is therefore important to
appreciate the effect such activities may have on operations both at the source of the project and
in other jurisdictions.
Globalisation has significantly affected the construction industry. The emerging markets , where
many substantial construction and infrastructure projects are carried out, generally have less
developed legal systems and processes for controlling bribery and corruption. In recent years, the
international spotlight has focused on many of these regions, with governments of more
developed economies seeking to impose controls on parties operating in these new and relatively
uncharted territories. Participants should not therefore assume that the absence of local laws will
shield them from sanction over bribery and corruption.
2. The Bribery Act 2010
The UK Bribery Act 2010 came into force on July 1, 2011. It provides for a number of offences
including:
a) bribing, giving, promising, or offering a bribe;
b) being bribed, requesting, agreeing to receive, or accepting a bribe;

c) bribing a foreign public official;

d) failing to prevent bribery where an associated person pays a bribe to obtain, or retain a
business advantage for a commercial organisation.
Importantly, the Bribery Act has broad extra-territorial effect. The basic bribery offences of
bribing and receiving a bribe apply to projects performed both within and outside the United
Kingdom, provided that one of the persons involved has a close connection with the United
Kingdom, or part of the bribe transaction involves the United Kingdom.
The Bribery Act also imposes strict liability on organisations which fail to prevent payment of
bribes in connection with their business by those persons acting for them, or on their behalf.
Such associated persons include employees, agents, subsidiaries and even joint venture
partners. The legislation in relation to this offence is particularly far reaching in that it applies not
only to companies incorporated in the United Kingdom but, also, to companies incorporated
elsewhere who conduct part of their business in the United Kingdom and who may commit the
offence in another country. For example, a US construction company with a UK presence may be
liable for the acts, or omissions of a subsidiary operating in China. This may well be the case
even though the offending persons operating in China have no direct, or physical connection with
the United Kingdom.
Senior officers also face personal liability under the Bribery Act for conniving in, or consenting
to bribery. For instance, where the senior management of a construction company operates in
regions with a track record of corruption, their failure to establish bribery prevention procedures
may well constitute connivance in corruption.
Unlike certain other legislation, such as the US Foreign Corrupt Practices Act 1977 (FCPA), the
Bribery Act makes facilitation payments unlawful. Small payments made to officials in an effort
to expedite, or secure performance of routine government action are permitted under the FCPA.2
No such exception exists in the Bribery Act, although there is some question about the US
position, especially in light of more recent cases suggesting the exception is narrowly construed.
Indeed, senior management of Californias Control Components Inc. recently admitted to paying
officials of state owned facilities in China, Korea, Malaysia and the UAE some US$4.9 million
on approximately 26 separate occasions.3 Although expedition of certain routine governmental
action is exempted from application of the FCPA, the reality is that many US organisations adopt
zero tolerance policies on the basis that the exception is regarded by many as problematic.4
In any event, making facilitation payments in the United States, the United Kingdom, or
elsewhere, may constitute a criminal offence under the Bribery Act, even if such payments
otherwise comply with the FCPA. Guidance from the Serious Fraud Office (SFO) in the United
Kingdom provides that action will most likely be taken where the facilitation payments are large
and/or regular and where there is no indication that prevention measures have been put in place.
Action may even be taken in relation to acts of corporate hospitality.

The Bribery Act does provide for a defence to the offence of failing to prevent a bribe where the
organisation is able to show that it had adequate procedures in place to prevent bribery. The
nature of such procedures is addressed later in this article.
Sanctions for failure to comply with the Bribery Act are unlimited fines for companies and up to
10 years imprisonment and/or unlimited fines on indictment for individuals. Company directors
may also be disqualified from acting as directors for a period of up to 15 years. Certain sanctions
may also follow in addition to those under the Bribery Act, such as prohibitions on entering into
public contracts,5 the confiscation of assets under the Proceeds of Crime Act 2002 and, in some
circumstances, the invalidation of contracts procured through bribery.
Civil rather than criminal sanctions are more likely where corruption is self-reported and where
businesses cooperate with the SFO. This has indeed been the approach in certain high profile
matters, such as that involving British bridge equipment manufacturer, Mabey and Johnson. In
September 2009, the company pleaded guilty to charges of corruption which resulted in fines,
reparations and the confiscation of contract proceeds of some 6.6 million.6
3. Proceeds of Crime Act 2002
The Proceeds of Crime Act 2002 (POCA) creates further offences in connection with bribery and
corruption, by specifically targeting money laundering activities. Essentially, a person commits
the offence of money laundering by:
a) concealing, disguising, converting, or transferring criminal property, or removing it from
England, Wales, Scotland, or Northern Ireland;
b) entering into or becoming concerned with an arrangement which the person knows, or
suspects facilitates the acquisition, retention, use, or control of criminal property by, or on behalf
of another person;
c) acquiring, using, or having possession of criminal property.7
Criminal property is broadly defined and includes any benefit obtained as a result of criminal
conduct. For example, payments received pursuant to a construction contract, procured through
an act of bribery, will constitute criminal property.8 Criminal conduct, as defined by the POCA,
may occur not only in the United Kingdom, but also in other jurisdictions. The criminal conduct
in question is assessed by reference to the criminal law as it applies in the United Kingdom. This
means that perfectly lawful activities in other countries may nevertheless constitute criminal
conduct for the purposes of the POCA.9
Although there are defences available where, for example, the conduct is lawful in the
jurisdiction of performance, duty holders will inevitably have some difficulty deciding whether
particular conduct is indeed lawful in a given country. Multi-national organisations with
operations in the United Kingdom arguably need to ensure that all of their activities worldwide
are POCA compliant, unless they have local legal advice confirming the legality of questionable
activities.

Confiscation orders may be imposed which require recipients to disgorge the proceeds of
criminal property. Indeed, this was the result in Mabey and Johnson, who admitted to bribing
government officials in relation to bridge building contracts in Jamaica and Ghana. The bribes
included payments to Saddam Husseins government in breach of UN sanctions.
It is hardly surprising that the payments the subject of Mabey and Johnson constituted criminal
property. However, there are other less obvious activities where the POCA may well affect
construction operations. It has been suggested that the POCA could come into play where a
company is prosecuted for breaches of health and safety law. For example, a contractor who is
responsible for work site deaths and who has failed to allocate sufficient funding to protect
workers from injury, thereby benefiting from the savings generated, is arguably the recipient of
criminal property.10
Contravention of local planning requirements may also give rise to offences under the POCA. In
Basso and Another v R,11 the England and Wales Court of Appeal confirmed that profits derived
from an airport car-parking facility constructed without planning permission constituted criminal
property. The owner in that case was the subject of a confiscation order covering revenue
received from the unlawful business operation which exceeded the profits actually made from
the venture.
The above examples indicate the far reaching and perhaps unanticipated impact of the POCA on
construction industry participants. Operators should be aware that unlawful activities, however
trifling they may appear, could well result in severe financial and reputational consequences.
Indeed, on October 9, 2012, the SFO confirmed that it will prosecute under the Bribery Act in
appropriate cases; however, civil confiscatory powers, such as those under the POCA, may be
exercised as an alternative, or in addition to criminal proceedings.12
4. The Foreign Corrupt Practices Act
The FCPA makes it unlawful to bribe foreign government officials to obtain, or retain business. It
also requires maintenance of records which accurately and fairly reflect transactions and
adequate systems of internal accounting controls.13
Like the Bribery Act, the FCPA applies to unlawful activities performed anywhere in the world
by US companies, or persons. The jurisdiction extends to those who are registered, or have their
principal place of business in the United States, or are controlled by a US parent corporation. It
also applies where foreign companies, or persons act in furtherance of corrupt payments within
the United States.
Criminal and civil sanctions may be imposed for failure to comply with the FCPA. They may
include fines, terms of imprisonment, being ruled ineligible to receive export licences and being
suspended, or barred from participating in government contracts. Private causes of action may
also be brought for punitive damages.
Defences apply where, for example, payments are made to facilitate, or expedite routine
governmental action, such as obtaining permits, licences, or other official documents. However,

as indicated above, this defence is construed narrowly and it is therefore difficult to apply in
practice. There is also a defence available if the payment was lawful in the foreign officials
country.
Proceedings brought under the FCPA have affected a number of well-known construction
companies. For example, a joint venture between KBR, Technip, Snamprogetti, and JGC
Corporation paid more than USD180 million to government officials in order to secure a USD6
billion construction contract for a liquefied natural gas facility on Bonny Island in Nigeria.
Marubeni Corporation was the agent through which the bribes were paid. In addition to the
criminal fines and disgorgements paid by the defendants, which exceeded USD1 billion, KBR
and Technip were ordered to retain independent compliance monitors, whilst the key individuals
involved were sentenced to lengthy prison terms and payment of fines.14 These proceedings
confirm that the US Department of Justice maintains a zero
tolerance approach to bribery and corruption in the construction industry. They also highlight the
significant consequences for participants who fail to implement appropriate anti-bribery
measures.
5. Vulnerability of construction industry to bribery and corruption
The construction industry, by its very nature, is exposed to bribery and corruption. Parties
involved with construction and engineering projects are especially vulnerable for a number of
reasons including:
(i) High risk jurisdictions
Bribery and corruption may occur anywhere in the world, however, the risk is higher in certain
jurisdictions. For example, North Korea and Somalia are recognised as particularly high risk
countries, whilst Denmark and Finland are acknowledged as very low risk.15 Many major
construction and engineering projects are carried out in high risk jurisdictions. Indeed, growing
demand for infrastructure in the emerging markets has attracted many new entrants from more
established economies, including the United States and the United Kingdom.
(ii) Cultural differences
Local agents are often necessary conduits between foreign entities and the organisations they are
dealing within unfamiliar jurisdictions. Such agents may have different views from those of their
employers when distinguishing between conduct which is regarded as compliant and that which
is tainted with bribery, or corruption. These views are often influenced by cultural differences
which, in certain instances, may tolerate activities otherwise regarded as unacceptable in other
jurisdictions.
(iii) Limited regulation
The regulation of construction and engineering projects is generally less rigorous in less
developed countries. The temptation for parties to engage in bribery and corruption is inevitably
greater where there is a perception that the risk of being detected and penalised is relatively low.

Consequently, the solution increasingly being adopted by governments of more developed

economies is the introduction of their own regulatory controls with extra-territorial reach.
(iv) Limited competition
The pool of parties with the capacity to carry out and complete the larger and more complicated
projects is often quite limited. Over time, parties will develop relationships with key decisionmakers in the procurement process. This may present a further inducement to become involved
in bribery and corruption.
(v) Ease of concealment
The significant scale of many projects makes it easier to conceal bribery and corruption. Large
sums of money transferring through complicated structures and supply chains can provide cover
for unlawful activity. Indeed, even the dispute resolution processes used in many international
construction projects, especially private processes such as arbitration, have been acknowledged
as having the capacity to provide a medium for money laundering.16
6. Managing compliance
The appropriate bribery prevention procedures for any given organisation will vary greatly
depending on its size, the nature of its business and the geographic locations where it operates.
The core principle is that the procedures should be proportionate in each case.
UK Government guidance recognises that isolated instances of bribery will occur in even the
best managed businesses. However, the onus is on the organisation itself to show that adequate
procedures were in place to prevent bribery.
Key principles applicable to ensuring compliance with the Bribery Act and the FCPA are set out
below.
(i) Proportionate procedures
Anti-bribery procedures should be proportionate to the bribery risk faced by the organisation and
have regard to the nature, scale and complexity of the organisations activities. International
construction companies working on large and politically sensitive infrastructure projects in
Zambia arguably require more extensive anti-bribery procedures than developers carrying out
house renovations in the United Kingdom. In any event, the procedures should be clear,
practical, accessible and effectively implemented and enforced. They are best applied
prospectively, although procedures may also allow for retrospective application to existing
associated persons. Organisations should take a practical, risk-based approach in each case. This
may be somewhat similar to the approach taken in relation to compliance with health and safety
laws such as the Construction Regulations in the United Kingdom.17
(ii) Top-level commitment

Top-level management must be committed to preventing bribery by any person associated with
the organisation. They must foster a culture within the organisation that bribery is never
acceptable. This is likely to require their involvement in communicating the anti-bribery
approach as well as in developing the procedures and dealing with breaches.
(iii) Risk assessment
The organisation should periodically assess the nature and extent of its exposure to potential
external and internal bribery risks. This process should be informed and documented, it should
involve top-level management and it should evolve with the business. Documentation of this
process is crucial for any defence that adequate procedures were in place. Whilst such processes
may be criticised for simply generating self-serving paper trails, as opposed to genuinely seeking
to identify and deal with relevant risks, the absence of well documented assessments will
invariably create difficulties in the event of an investigation.
(iv) Due diligence
Adequate due diligence procedures should be performed on those persons providing construction
and design services for the organisation. The approach should be risk-based and proportionate
with a view to mitigating identified bribery risks. In commenting on Mabey and Johnson, the
former director of the SFO, Richard Alderman, indicated that the SFO will be far less
sympathetic to those whose due diligence has been deficient.18
(v) Communication and training
The organisation should ensure that its bribery prevention policies and procedures are understood
throughout the organisation from top-level management through to site labourers. Training may
need to be conducted both internally and amongst external contractors and suppliers.
(vi) Monitoring and review
The organisation should monitor and review its anti-bribery procedures and improve them where
necessary. This means monitoring both internally and externally. Indeed, an employer should
monitor its own staff as well as the various professional team members and construction
contractors appointed to carry out and complete the project. Some care should be taken to ensure
that the persons appointed to monitor are not the same persons involved with the business
processes and transactions.19
(vii) Reporting
The organisation should regularly report on its anti-bribery measures. Recent guidance from
Transparency International suggests that an organisation should publish the following
information:

details of anti-bribery and anti-corruption programs;

details of subsidiaries, affiliates, joint ventures and related entities;

individual financial accounts for each country of operations;

corporate website containing at least one international language.20

The particular information required will vary according to the nature of the organization and the
activities with which it is involved. For example, disclosure rules released by the US Securities
and Exchange Commission in August 2012 affect those in the extractive industries who are
required to file annual reports with the Commission. The primary aim of the rules is to ensure
that governments are held accountable for the wealth created through extraction, processing and
export of natural resources. In particular, the rules require businesses to report on payments made
to foreign governments in relation to each project involving the commercial development of oil,
natural gas, or minerals.21 Such reporting is required in relation to all subsidiaries of reporting
companies, regardless of where their projects are located.
It has been suggested that these disclosure rules, which apply in addition to the Bribery Act and
FCPA, will assist investors to better understand the risks involved in countries where governance
is weak and there is relatively greater exposure to bribery and corruption.22
At the same time, the rules may well assist in revealing payments made in contravention of
antibribery legislation. They are indicative of the increasing level of government intervention
from developed economies, with reporting requirements being imposed wherever business is
conducted.
These principles are deliberately flexible and outcome focused, allowing those involved in
construction projects to tailor appropriate compliance procedures. Like the principles which
apply in managing compliance with health and safety requirements, the responsibility is on the
participants to develop, implement and monitor appropriate anti-bribery measures.
7. Problem areas for construction projects
There are a number of areas where bribery and corruption pose a unique threat to the
construction industry. Indeed, the Anti-Corruption Code for Individuals in the Construction and
Engineering Industry23 outlines no fewer than 47 scenarios where bribery, deception and fraud
may occur in relation to construction projects and the disputes arising from them.
Areas of particular concern to the construction industry include those set out below.
(i) Joint venture arrangements
Larger projects are often procured pursuant to joint venture, or alliance arrangements. The
difficulty with these arrangements is that one joint venture partner may have little, if any, control
over the acts and omissions of the other partner. Appropriate processes and procedures may have
been implemented by one partner and not the other; however, joint venture partners are
effectively jointly and severally liable for all of their fellow partners.

Nevertheless, for the purposes of the Bribery Act, the existence of the joint venture alone does
not automatically mean that one partner is responsible for the other partners. It must also be
established that, for example, the joint venture entity was performing services for the joint
venture partner and that the joint venture entity paid a bribe for the benefit of that partner. Much
will depend on the degree of control which the partners have over each other through contractual
and other arrangements. Indeed, where the joint venture itself is conducted through a contractual
arrangement, as opposed to a separate legal entity, there is greater likelihood of one partner being
held responsible for the acts, or omissions of other partners.
Professional consultants in the UK construction industry have embraced net contribution clauses
as a means of avoiding joint and several liability. Such clauses seek to limit a particular
consultants liability to that for which it is directly responsible.24 But they will not protect against
a joint venture partners failure to prevent bribery by an associated person. Responsibility for
such failures cannot be avoided by contract. In the circumstances, the best form of protection is
to ensure the joint venture has adequate procedures in place to prevent bribery at the outset.
(ii) Facilitation payments
Contractors will often import materials from other jurisdictions and, in doing so, will be required
to clear customs and other government imposed controls. Facilitation payments may be used as a
means of obtaining approval for goods that satisfy these controls. Whilst these payments are
permitted in certain jurisdictions, and indeed are expressly authorised by the FCPA, they are
prohibited under the Bribery Act.25
Government approvals are typically required in relation to plans for design and construction. It
seems clear enough that payments made to a government authority, with the intention of unduly
influencing its decision-making process, will amount to facilitation payments. However, less
obvious arrangements may also fall within the scope of this offence. For example, payments
made to authorities for the purpose of obtaining specifications favouring certain proprietary
materials, or equipment are likely to be illegal facilitation payments. This practice has been
observed in China, where state-owned design institutes have accepted such payments in return
for their endorsement of particular suppliers. In one recent example, US supplier, Watts Water,
was ordered to disgorge profits made and to pay penalties in connection with facilitation
payments disguised as sales commissions.26
Given the widespread practice of making facilitation payments in certain countries, such as
Africa, some operators have questioned whether it is appropriate to criminalise them. Indeed, the
Australia-Africa Mining Industry Group has recently suggested that anti-bribery laws in this
context are counter-productive.27 They argue that many African governments are not in a position
to pay officials the salaries they deserve and facilitation payments are therefore seen as a
necessary supplement in such countries. But the difficulty with this is that, although such
payments arguably form part of the business approach in certain countries, they are likely to
contravene the FCPA and will almost certainly constitute bribes under the Bribery Act.
Therefore, the best approach is to ensure that key stakeholders and, in particular, those at the coal
face of operations understand that such activities are unlawful and will not be tolerated.

(iii) Sub-contracting
Those persons managing tender processes for sub-contracted work and services are exposed to
potential bribes from tendering sub-contractors. Indeed, the potential for bribery exists
throughout the supply chain. The acceptance of material incentives, even if they emanate from
the most competitive and ultimately the chosen sub-contractor, is likely to constitute bribery.28
This can be controlled, to some extent, where employers are involved in the sub-contract
selection process carried out by their contractors. Indeed, the employer may nominate, or name,
particular subcontractors which provides an opportunity to better understand their business and
the terms of their appointment. Other methods of protection include questionnaires and training
schemes containing anti-bribery components. By carrying out at least some level of due
diligence, the employer will be better placed to demonstrate that adequate procedures were in
place.
The employer may also impose on its main contractor certain obligations in relation to subcontracts as a means of limiting the potential for bribery offences. For example, the main
contract could include cascading obligations to the effect that all sub-contracts shall contain antibribery provisions consistent with those in the main contract. Main contractors can protect
themselves with similar terms cascading through to any sub-subcontracts.
But anti-bribery provisions alone are unlikely to be sufficient. Indeed, the SFO suggests a
mixture of contractual provisions and procedures, such as risk based due diligence, are imposed
throughout the supply chain.29 For high risk projects, such provisions and procedures should be
carefully tailored to adequately address the particular risks involved, however, they can be
simplified where the risks are relatively low. Even if the employer has little involvement in the
sub-contracting process itself, such measures will help to establish the defence that adequate
procedures were in place.
(iv) Procurement agents
The appointment of well-connected procurement agents is commonly made where parties are
seeking to source materials, plant and equipment at keen prices. These relationships are more
conducive to bribery and corruption as they can heavily influence decisions as to choice of
suppliers. Appointing parties may well have little or no contact with the persons involved in this
process, which leaves them even more exposed to unknowingly engaging in bribery through the
acts, or omissions of their procurement agents.
Given the greater potential for bribery in relation to this kind of arrangement, employers should
take extra care with the appointment process, ensuring that adequate anti-bribery provisions are
included in the procurement agents terms of appointment and in monitoring the agents
performance. Of course, such measures will be limited to those matters which are properly
within the employers control.
This raises the question of the extent to which the employer should become involved. Arguably
the employer will face less responsibility where, for example, less onerous monitoring provisions
are included in an appointment. However, the absence of any such provisions might suggest that

the employer failed to adequately assess the risks at the outset. Clearly a balance is required to
ensure that the risk assessments, and the anti-bribery measures imposed, are appropriate having
regard to matters such as the nature and location of the project in question.
(v) Contract administration
In many jurisdictions, including the United Kingdom, contract administrators have a duty to act
impartially as between their employer and the contractor. However, in certain instances, parties
may agree that contract administrators are the employers person and that they have no such
duty.30 Such arrangements are more likely to result in contraventions of the Bribery Act. For
example, an employers own person, who is not regulated by a professional body, may face
greater temptation to accept bribes from contractors as a means of speeding up issuance of
completion certificates.
Employers should be aware that, if they choose not to appoint a third party contract
administrator, greater efforts will be required to demonstrate that anti-bribery processes and
procedures are adequate and have been satisfied. This highlights one of the main difficulties in
attempting to apply uniform legal frameworks in different locations with differing industry
practices.
There is also significant scope for bribery offences in connection with the issuance of interim and
final payment certificates. For example, unscrupulous employers may offer contract
administrators the opportunity to tender for other projects if they follow instructions to delay, or
unlawfully withhold payments which are properly due to contractors.
Conversely, contractors may agree with contract administrators to account for off-site materials
which are not properly designated and set aside for the project in question.31 They may also offer
bribes to facilitate approval of claims for additional money, or time where such claims are not
properly justified. While certain safeguards may be imposed through the performance of due
diligence at the outset of a project, and through the incorporation of appropriate contractual
provisions, it will also be important to carefully monitor those involved with contract
administration duties throughout the course of the project.
(vi) Unjustified calls on bank guarantees and bonds
Unlawful calls on bank guarantees and other forms of performance, or payment security may
also be the subject of bribery offences. For example, an unscrupulous employer seeking to
convert a bank guarantee may bribe a contract administrator to assist with the conversion. This
might entail the wrongful certification of the contractors breach of the underlying construction
contract in circumstances where such certification is a condition precedent to conversion.
Although it is difficult for contractors to protect themselves against this possible outcome, they
may obtain some benefit by lobbying for an independent third party to act as the contract
administrator. They may also request provisions which give them an opportunity to challenge
unlawful calls.

Funds received by beneficiaries as a result of unlawful calls against bank guarantees, or bonds
are likely to constitute criminal property under the POCA. This raises the question of how the
competing interests of issuing banks, contractors and government entities will be resolved in
accounting for any proceeds obtained in excess of the beneficiarys loss and damage. Arguably
the issuing banks and contractors are in a more difficult position if confiscation orders are made
against the beneficiary. They may need to consider the possibility of pursuing both the
perpetrator of the offence and the government for recovery of their funds.
(vii) Project financing
Larger projects are often financed through debt and/or equity funding. Recipients of such
funding must ordinarily represent to their lenders, at the very minimum, that they will not engage
in bribery, or corruption. Evidence of bribery, or corruption will almost certainly prejudice
ongoing financing arrangements. For example, in June 2012, the World Bank announced a
withdrawal of its $1.2 billion International Development Association credit for the Padma bridge
project in Bangladesh.32 The Banks investigative team had previously informed the government
borrower about corruption related to the project, and identified a series of counter-measures to be
implemented. The borrower failed to implement those measures and so the Bank cancelled its
financing.
Furthermore, through a mutual cross-debarment agreement, the World Bank, African
Development Bank Group, Asian Development Bank, European Bank for Reconstruction and
Development and the Inter-American Development Bank will enforce each others debarment
actions. Therefore, if any one of these Banks finds evidence of bribery, the borrower is likely to
be ineligible from bidding on other Multilateral Development Bank projects. Furthermore, any
future funding will invariably be the subject of strict controls designed to monitor and avoid
future bribery and corruption, which will add considerably to financing costs.33 The message
from the World Bank is clear that any direction it provides on anti-bribery measures must be
taken seriously.
(viii) Witness evidence
In the event of legal proceedings, such as litigation, or arbitration, overzealous parties may offer
bribes to witnesses with the intention of advancing, or undermining claims and defences. The
parties who agree to do so, and who ultimately provide false evidence, will invariably commit
bribery offences as well as offences against the administration of justice such as contempt of
court.
For witnesses employed by well advised parties, contractual safeguards against bribery may
appear in their employment contracts. However, this form of protection may not be available in
all cases. Appropriate measures in such instances are likely to include careful due diligence to
ensure that evidence is truthful and is not the subject of manipulation.
8. Conclusion

The proliferation of cross-border business activity has generated new opportunities for the
construction and engineering industry. It has also created challenges for those charged with
delivering construction and engineering projects in accordance with relevant legal requirements.
One of the more pressing challenges is ensuring compliance with the increasingly stringent
regulation of bribery and corruption.
In many countries, legal frameworks are either non-existent, or inadequate as a means of
controlling the activities of those involved. This has led to the development of government
controls with global reach in order to remotely influence project participants. Awareness of these
controls amongst all levels of management and operations is now more important than ever.
The controls imposed through the FCPA, the Bribery Act and the POCA are flexible enough to
operate effectively in relation to construction projects completed anywhere in the world. Any
suggestion that they can be ignored, or that compliance may be excused, because of the
geographic location, or cultural differences involved will not provide a helpful defence.
The conduct of project participants may range from that which is seen as little more than morally
improper, or unethical through to more serious matters such as fraud, bribery and corruption. The
boundaries between these concepts are not always clear. Ultimately, relevant acts, or omissions
must be considered in their given context to establish exactly where they fall within this range.
The larger, better resourced and more experienced players are clearly expected to lead by
example and often have the economic power to do so. Measures for avoiding bribery and
corruption must be proportionate and must have due regard to particular risks such as those
applicable in emerging markets.
Responsible, practical and transparent management and operational practices are the key to
dealing with bribery and corruption. Indeed, the potential consequences for failure to
accommodate these ever-expanding regulatory requirements provide a substantial incentive for
participants to proactively manage bribery and corruption in the construction industry.
1. For example, the Transparency International, Bribe Payers Index, October 2011, at p.14, ranks public works and construction as the most bribery prone
industry sectors.
2. Section 78 of the FCPA.
3. See, for example, The United States of America v David Edmonds SA CR No.
09-00077-JVS SA CR No. 09-00077-JVS, Plea Agreement of June 14, 2012.
4. Indeed, accurate records of facilitation payments must be maintained which potentially leaves organisations in a difficult position for future
investigations.
5. EU Directive 2004/18/EC of the European Parliament and of the Council on the coordination of procedures for the award of public works contracts,
public supply contracts and public service contracts, March 31, 2004. It should also be noted that criminal conviction carries with it exclusion under World
Bank rules. This point is discussed in more detail later in this article.
6. Serious Fraud Office Press Release, September 25, 2009.
7. Sections 327 to 329 of the POCA.
8. This may also include profits arising in connection with the contract and which have been distributed to group companies in other countries as was the
case where Mabey Engineering (Holdings) Ltd was ordered to disgorge dividend profits received from its subsidiary, Mabey and Johnson, in connection
with illegal bridge building contracts in Iraq (Serious Fraud Office Press Release, January 13, 2012).
9. Subject to various defences, including belief on reasonable grounds that the conduct was not criminal in the place it occurred (s.102 of the Serious
Organised Crime and Police Act 2005), acquisition, use, or possession of property subject to adequate consideration (s.329(2)(c) of the POCA) and lack of
knowledge, or suspicion that property is criminal property (s.340(3)(b) of the POCA requires that the person knows or suspects it is criminal property).
10. Lord Advocate, Frank Mulholland QC; Transcript of Scottish Affairs Committee, December 14, 2011 at question 871. In the United Kingdom, new
regulations will take effect from October 1, 2012 which also require those in breach of health and safety law to pay the health and safety authoritys costs of
investigating relevant incidents (Health and Safety (Fees) Regulations 2012).
11. R v Del Basso (Luigi) [2010] EWCA Crim 1119 (May 19, 2010), per Leveson L.J.
12. Serious Fraud Office, Revised Policies, October 9, 2012.
13. Section 387 of the Companies Act 2006 provides that a UK companys failure to keep adequate accounting records may trigger criminal liability for its
officers.

14. United States Department of Justice, Office of Public Affairs, Press Release, February 11, 2009.
15. Transparency International Corruption Perceptions Index, December 5, 2012.
16. Andrew de Lotbinire McDougall, International Arbitration and Money Laundering 20(5) American University International Law Review.
17. Construction (Design and Management) Regulations 2007.
18. Serious Fraud Office Press Release, January 13, 2012.
19. This can be contrasted with the recent case involving a Wal-Mart subsidiary in Mexico, which put the person who allegedly authorised certain bribes in
charge of its corruption investigation; as reported in the New York Times, April 21, 2012.
20. Transparency in Corporate Reporting; Assessing the Worlds Largest Companies (Transparency International, June 2012), p.6.
21. Section 13(q) of the Securities Exchange Act of 1934 (introduced through s.1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
relating to disclosure of payments by resource extraction issuers). UK registered companies must also keep adequate accounting records and their failure to
do so may trigger criminal liability for their officers under s.387 of the UK Companies Act 2006.
22. US Securities and Exchange Commission Final Rule Release on Disclosure of Payments by Resource Extraction Issuers NO. 34-67717; FILE NO. S742-10 at 145.
23. Neill Stansbury, Unethical Behaviour and Criminal Acts, Society of Construction Law,March 2005.
24. See for example the standard terms of appointment produced by the Association of Consultant Engineers (ACE).
25. The payments would also constitute criminal property under the POCA. It is important to note that there are reservations as to the scope of the authority
for such payments under the FCPA, as discussed earlier in this article.
26. In the Matter of, Watts Water Technologies, Inc. and Leesen Chang, Respondents Administrative Proceeding File No. 3-14585 of October 13, 2011.
27. E Swanepoel, Criminalising Facilitation Payments Wont Have Desired Effect AAMIG, Mining Weekly, May 4, 2012.
28. Both the incentives and subsequent payments made in relation to the sub-contract would constitute criminal property under the POCA.
29. Government guidance of March 2011.
30. Scheldebouw BV v St James Homes (Gosvenor Dock) Ltd [2006] EWHC 89 (TCC) per Jackson J. as he then was. Cf Beaufort Developments (NI) Ltd
v Gilbert Ash (NI) Ltd [1998] 2 All E.R. 778 where Lord Hoffmann said of the contract administrator, He is a professional man but can hardly be called
independent.
31. This risk can be managed to some extent through the use of vesting certificates.
32. World Bank Statement on Padma Bridge, June 29, 2012.
33. See, for example, the World Bank Statement on Padma Bridge, September 20, 2012.

This article was first published by Thomson Reuters and is reproduced with permission.
Copyright 2013, Thomson Reuters.
2015 Dorsey & Whitney LLP. This article is intended for general information purposes only and should not be construed as legal advice or legal opinions
on any specific facts or circumstances. An attorney-client relationship is not created or continued by reading this article. Members of the Dorsey & Whitney
LLP group issuing this communication will be pleased to provide further information regarding the matters discussed therein.