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Why is it important to adopt Anti-Bribery Procedures? - by Adv. Gil Remeny

February 2012 - Corporate & Commercial. Legal Developments by GSCB Glusman Shem-Tov Chowers Broid.

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Is your business involved in international trade? If the answer to this question is a resounding “YES”, then it might well be time for your business to prepare and adopt a code of conduct that includes procedures to detect and prevent bribery of foreign government officials. The day is coming when not having such a code will be a bar to entering many different lucrative markets and will place you and your business in danger of breaking the law.

In December 2010 the Israeli Ministry of Defense issued notices to a group of the leading Israeli defense exporters that they would be expected to adopt suitable anti-bribery procedures. IMOD stated that if any such company fails to provide it with a copy of their procedures and evidence that they have been adopted by December 31, 2011, then it would refuse to issue the offending company with the marketing and export licenses that they require in order to conduct international transactions involving military products and technologies. While the IMOD started with a selective group of companies, the intention is to eventually expand the requirement to all Israeli businesses as a precondition to obtaining Israeli defense marketing and export licenses.  

This follows Israel formally joining the Organization for Economic Development and Cooperation (OECD) on September 13, 2010. As steps leading up to Israel’s acceptance to the OECD, in July 2008 Israel introduced into Israeli law the crime of bribing foreign government officials and Israel signed on to the Convention on Combating Bribery of Foreign Public Officials in International Business in 2009.  While there is no requirement for adoption of anti-bribery procedures under the Israeli law, the IMOD’s is taking steps to make this a requirement for its export licenses due to a recommendation made by the OECD’s Working Group on Bribery in 2009 that Israel needs to take a more proactive approach in investigating, detecting and preventing bribery of foreign officials, particularly in the defense sector. It is likely that similar requirements will follow sooner rather or later for Israelis carrying on businesses in other sectors where the temptation to bribe foreign government officials is strong.

Even where there is no formal requirement for your business to adopt anti-bribery procedures, adopting a robust code of conduct that is tailored to your company’s size and organization, will go a long way to ensuring that it does not unwittingly break the law due to the deliberate or careless actions of any over eager employees.

Furthermore, a number of countries have adopted laws and regulations that will effectively require Israeli companies to adopt anti-bribery procedures if they wish to conduct business in those countries. For example, the U.S. Government adopted a requirement as part of its Federal Acquisition Regulations (FARs) for government contractors to have a code of business ethics and conduct if they are working on a government contract with a value of over US$5,000,000 and a performance period of more than 120 days. Government contractors must flow this requirement down to any of their subcontractors that have been awarded contracts that also meet the threshold requirements, regardless of where the contractors reside, are incorporated or based. Failure to comply with this requirement is considered by the FARs as a cause for termination of contract. Amongst other things, the code of conduct must be capable of detecting and preventing bribery of government officials in connection with the contract. Companies must disclose to the U.S. Government any credible evidence of bribery in connection with the contract that they may discover.

In 2010, the U.K. passed the Bribery Act which came into force in July 2011 (the “Bribery Act”). The Bribery Act makes it a crime for any company to offer government officials bribes or to accept bribes from them. The Bribery Act applies to any person or company that has assets in the U.K. or conducts any business in the U.K., including non-U.K. businesses. Effectively, prosecutions could be brought against an Israeli company for acts considered as crimes under the Bribery Act that were committed in connection with British related business. Having adopted and implemented suitable anti-bribery procedures is a defense against criminal prosecution under the Bribery Act. The British Government have provided guidance on what it considers to be the main elements of suitable anti-bribery procedures. As a result, many U.K. companies engaged in international business now include in their contracts a requirement for their contractors to adopt anti-bribery procedures that meet the requirements of the Bribery Act. These requirements are often described as material conditions of the contract, giving rise to termination of the contract if not complied with.

So when considering the likely increase in requirements of Israeli law and the need in many cases to adopt anti-bribery procedures to comply with legal and contractual requirements of overseas business, governments, customers and partners, it makes more and more sense for Israeli businesses engaged in international trade to already be prepared and to adopt suitable procedures.

At GSCB, we have prepared a code of conduct that includes anti-bribery procedures that meet the recommendations issued by the IMOD and the requirements of the OECD, the U.S. FARs and the Bribery Act. We have experience in tailoring the code of conduct to meet the specific client’s organization and characteristics and in assisting the clients to formally adopt, implement and monitor the effectiveness of the code of conduct.   

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