(Note: Please refer to the Frequently Asked Questions (FAQs) at the end of this PACS Standard for further guidance on this Standard.)
This PACS Standard makes the following recommendations in relation to funder anti-corruption commitments.
Significant corruption can occur in project funding. The relevant officials of the funder may be actively involved in this corruption if, for example, they are bribed to agree funding for a corrupt project. Alternatively, they may be encouraged to be reckless to this corruption if, for example, their performance bonus is dependent on the number of loans provided. Similarly, project owner officials may be actively involved in corruption in project funding. They may, for example, bribe the funder’s official to approve the loan for a corrupt project or on corrupt terms. It is, therefore, necessary for both the project owner and the funder to give express anti-corruption commitments. These will serve a number of purposes:
This PACS Standard recommends detailed anti-corruption commitments for the following reasons:
First, sub-clauses 7 to 11 above are designed to give the parties guidance as to the types of activities that are prohibited and also to help them understand that corruption can occur in a number of ways and affect a wide range of activities. For example, individuals may not be aware that the following could give rise to criminal liability:
Second, clauses 12 to 15 (first bullet) above are designed to ensure that each party has taken proper precautions in relation to the funding arrangements.
Third, the second bullet in clause 15 above is designed to ensure that each party is contractually obliged to comply with the anti-corruption measures which apply to the project.
Fourth, clause 16 above is designed to highlight the serious penalties for involvement in corruption. It refers to contractual penalties which can be enforced by the parties, and to the criminal penalties that will apply.
It is of course possible to reduce the number of anti-corruption commitments given. However, this will also reduce their effectiveness.
The anti-corruption commitments should be exchanged between the project owner (who is assumed to be the borrower/recipient of funds) and each project funder.
These commitments should be provided no later than when the funding agreement is signed.
These commitments should cover the full extent of the party’s involvement in the project, so should continue until loan repayment has been completed.
There will be no certainty that parties will comply with these commitments. There is always the risk that these commitments will be used simply to give the impression that anti-corruption measures are being taken.
However, the parties may be encouraged to comply in the following ways:
The decision of what would constitute a “principal shareholding” in a company for the purposes of the anti-corruption commitments is a decision for the project owner and/or funder in agreeing the commitments. The commitment should be in relation to any shareholder who could have a significant interest in the outcome of the funding or project. It is suggested that any individual or entity which owns or controls more than 10% of the shares or voting rights in a company is a principal shareholder.
“Senior manager” means a person with supervisory responsibility in respect of the funding or project, including, for example, a person with responsibility for contract, project, financial, procurement, commercial or technical management.
“Senior officer” means:
A contract between two parties cannot generally impose criminal penalties. However, reference to criminal penalties is used to draw the parties’ attention to the fact that there are severe criminal penalties for corruption under the general law. This will help to focus the parties’ minds on the issue of corruption and to deter them from involvement in corruption.
Updated on 10th April 2020