Dilemma 14:  Bidding to a contractor in a high corruption risk market - Answer

In most cases it is unlikely that your company and its employees will be liable for a bribe paid higher up the contractual chain (e.g. where a bribe is paid by an organisation your company is working for to another organisation higher up the contractual chain).  This is because, as you are lower down the contractual chain, it is generally impossible or difficult for you to control the actions of those higher up the chain.  They are not working on your behalf.

This should be contrasted with a company’s obligations for its partners and for those below it in the contractual chain (e.g. joint venture partners, agents, sub-contractors and suppliers).  In this case, it is generally believed that the company would have obligations to take reasonable steps to prevent corruption by these organisations, as they form part of your business structure, may be taking actions on your behalf, and you have some degree of control over them contractually.

However, care still needs to be taken when agreeing to work for companies higher up the contractual chain (e.g. working for a contractor if you are a sub-contractor, or working for a client if you are a contractor).  There may be some instances where you could be held to be liable.  For example, if you are a sub-contractor, and you believe that the contractor is bidding for a project in a high corruption risk country to a high corruption risk client, and you believe that it is very unlikely that the contractor could win the project without paying a bribe, or could not obtain certificates and payments without paying a bribe, then you are on notice of the likelihood of corruption.  As a result:

• If your company’s sub-contract package forms part of the contractor’s bid to the client, your company could benefit from the bribe if the contractor wins the contract (and your company as a result wins the sub-contract).  Your company could as a result be implicated.  The judge could say that “you must have known when you participated in the contractor’s bid in such a high corruption risk country and sector that the contractor was likely to pay a bribe”.
  
  

• If the contractor did pay a bribe, the payments to your company are likely to be the proceeds of a crime.  This could result in criminal liability under money laundering laws.  Many countries require people to report suspected receipt of proceeds of crime.  So, if you suspect that the contractor paid a bribe (even if you have no proof), and your company is receiving payments from the contractor, you may have a duty to report to your local authorities.

It is obviously impossible for you to be certain that every organisation you work for has won their contract honestly.  You cannot be expected to check this.  However, if you are on notice of a high risk of corruption as in the example above, then you should make reasonable enquiries before committing your company to the project.  For example:

• Does the contractor you are bidding to have a good ethical reputation and a firm anti-corruption policy?
  
  

• Does it seem likely that the contractor can win the contract without corruption (i.e. are the tender procedures run by the client fair and transparent, so that a bribe would not be able to influence the selection process?).

After making these enquiries, do you honestly and reasonably believe that the contractor will not pay a bribe to win the contract?  If so, you can proceed with caution.  If, however, you believe that it is likely that a bribe will be paid, you should not participate in the bid.