This section examines liability for corruption in the infrastructure sector.
In most jurisdictions, both organisations and individuals can be liable for a criminal offence. The exact extent of criminal liability will depend on the law of a particular country. However, the principles stated below, or materially similar principles, will apply in a number of jurisdictions.
As explained in What is Corruption, GIACC uses the term “corruption” in the wider sense to include bribery, extortion, fraud, cartels, abuse of power, embezzlement, and money laundering. Consequently, the discussion of liability in this section applies to all such criminal activity.
Criminal liability for individuals
An individual may incur criminal liability for corruption as follows:
- Those directly involved: An individual who is directly involved in committing a corruption offence may be liable for the offence. For example, an individual who personally pays or receives a bribe.
- Those indirectly involved: An individual may be liable for a corruption offence where she/he is indirectly involved in committing the offence. For example, an individual may be liable where she/he has used another person or organisation to commit the corrupt act on her/his behalf.
- Those in authority: A person in authority, such as a chief executive, director, financial manager or commercial manager, may be liable for a corruption offence even where she/he was not directly involved in committing the offence, but where she/he either expressly authorised the offence or that type of offence, or knew of the offence and either consented to it or turned a blind eye to it. Such liability may arise where, for example, a chief executive suspects that the company’s employees may be paying bribes on a project, but takes no action to prevent them doing so.
- Aiding and abetting: An individual may be liable for aiding and abetting (or equivalent offence) where she/he has somehow facilitated, aided or assisted in the committing of the offence (e.g. a finance manager processing a corrupt payment, where the finance manager knows or suspects that the payment is corrupt).
An individual may incur criminal liability even where:
- She/he was not aware that the activity constituted a crime.
- She/he did not or would not make any personal gain from the activity.
- She/he did not pay or receive the bribe personally, and instead the bribe was paid or received through or by another person, such as an agent, subsidiary company, joint venture partner, friend, spouse or other third party.
- She/he did not commit a fraud personally, and instead the fraud was committed by or through another person.
- She/he was following the instructions of a superior in the organisation.
- She/he believed that the actions were in the interests of her/his employer.
- There were threats of adverse consequences made to her/him in order to make her/him commit the offence (unless she/he feared imminent physical harm).
- The bribe or fraudulent activity did not involve money, but instead involved the provision of a non-cash advantage, for example, a future contract, a holiday, jewellery or other gift.
- The person who had been offered or who had received the bribe did not act in the way intended when the bribe was agreed.
- The bribe was offered, but was never actually paid.
- The amount of the bribe was less than the financial damage which could result from failure to pay the bribe.
- The conduct constituting the offence was widely practised and considered to be normal business practice.
- The conduct constituting the offence was believed to be necessary for a party to remain competitive.
- The offence did not succeed (as the person could be liable for an attempt to commit the offence).
In order to be criminally liable, it is normally necessary for the individual to have had some requisite degree of knowledge of the corrupt act. Therefore, the individual must have known that the act was corrupt, or suspected that the act was corrupt, or have been reckless as to whether or not the act was corrupt. It is unlikely that an individual could be liable for a corrupt act if she/he:
- acted in good faith
- did not want the act to be corrupt
- did not know that the act was corrupt; and
- had no reason to suspect that the act was corrupt.
Criminal liability for organisations
In many jurisdictions, organisations can be liable for criminal offences. This liability may arise in a number of ways including:
- Through the acts of its officers or employees. An organisation may incur criminal liability through the corrupt act of an officer or employee (whatever her/his position) if she/he was acting within the course of her/his employment. Therefore, if a junior employee responsible for preparing work records on behalf of the organisation submits a false work record to another organisation in support of the organisation’s claim for payment, then the organisation (as well as the junior employee) could be liable for fraud. Or, if a director of the organisation decides to pay a bribe in connection with the organisation’s business, then the organisation (as well as the director) could be liable for bribery.
- Through the acts of its agents. An organisation may incur criminal liability through the corrupt act of an individual or organisation which has been appointed to act on the organisation’s behalf, and where the corrupt act is committed in the course of that appointment. For example, if an agent appointed by the organisation pays a bribe to a third party in order that the third party awards a contract to the organisation.
- Through the acts of its related organisations or business associates. An organisation could be liable for a corrupt act committed by a subsidiary or associated organisation, joint venture or consortium partner, sub-contractor, consultant or supplier, where that corrupt act could benefit the organisation’s business or was carried out on behalf of the organisation. Such liability could arise where the organisation authorised, approved, condoned or turned a blind eye to the corruption. In some jurisdictions, liability could arise where the organisation failed to implement adequate procedures to prevent the corruption taking place. For example, if a sub-contractor appointed by a organisation pays a bribe to a third party in order that the third party awards a contract to the organisation (with the result that the sub-contractor is awarded the sub-contract).
- “Turning a blind eye” (or wilful blindness) occurs where a party in authority (such as an officer or manager of an organisation) suspects corruption in relation to a business transaction in which the organisation is involved, but deliberately refrains from making further inquiries and taking preventive steps. In such situations, even if the officer or manager has not been expressly told that, for example, a business partner is paying a bribe which may benefit the organisation, a court may infer that the officer or manager must have known that a bribe would probably be paid. This inference may arise where the circumstances would be likely to put the officer or manager on notice. Such circumstances would include, for example, where an agency commission is significantly disproportionate to the legitimate scope of services which the agent is to undertake, or where the agent has no capability for undertaking those services, or where the agency commission is to be paid, without good reason, in foreign currency into an off-shore bank account. The existence of a formal agency agreement will not prevent an inference of corruption. The courts would look at the circumstances surrounding the agreement and at its true effect, not merely at its form. It is, therefore, important for organisation officers and managers to make proper inquiries should they suspect corruption in relation to the organisation’s affairs, and to take steps to prevent or stop the corruption. If they fail to do so, their inaction may make the organisation liable (in addition to possibly causing them to incur personal liability).
Range of persons (both individuals and organisations) who may be criminally liable
A wide range of persons may be liable for a corruption offence.
For example, a bribe is agreed to be paid by a contractor to a government employee and, in order to conceal the bribe, it is paid by the contractor through a sub-contractor who in turn appoints an individual agent to pay the bribe. In such circumstances, the following persons may incur liability where they are aware of, suspect, or are wilfully blind to the corrupt circumstances:
- those directors and managers of the contractor and sub-contractor who authorise payment of the bribe, or who authorise the general policy of payment of bribes, whether tacitly or expressly
- those directors and managers of the contractor and sub-contractor who are involved in the decision to conceal the bribe by payment through the sub-contractor and agent
- the director or manager of the sub-contractor who directly negotiates the payment of the bribe with the agent
- those directors and managers of the contractor and sub-contractor who suspect that there may be corruption but do not make proper enquiries and take preventive steps
- the accounting employee of the sub-contractor who implements payment of the bribe to the agent and charges the contractor with the cost of the bribe
- the accounting employee of the contractor who implements reimbursement of the cost of the bribe to the sub-contractor
- the lawyer who drafts the agency or other agreement which was used as a cover for the bribe mechanism
- the agent who acts as intermediary for payment of the bribe
- the government employee who receives the bribe
- the contractor and sub-contractor (where they are companies), their liability being incurred through the knowledge and actions of their directors and managers.
As a result of the OECD Convention on Combating Bribery which came into force in 1999, all countries which have ratified the Convention have made it a crime for organisations registered in, or trading in, the signatory countries, and individuals who are nationals of the signatory countries, to bribe a foreign public official abroad. This means that such organisations and individuals may be prosecuted for bribery in their home countries (in addition to prosecution in the country where the bribery took place). (See Conventions).
Civil liability for individuals and organisations
In addition to criminal liability, both individuals and organisations involved in corruption are at risk of being sued and being found liable to compensate those other individuals or organisations who may have suffered loss as a result of such corruption. This may occur where, for example, an unsuccessful tenderer sues a tenderer who has been corruptly awarded a contract in order to recover the unsuccessful tenderer’s lost tender costs and lost profit.