Austrian and Ukrainian Anti-corruption Legislation by dfsdf224s


									                                                                    global legal update
                                              Austrian and Ukrainian

by Gudrun STANGL
                                                              ompanies are often forced              Criminal Law Convention on Corruption
                                                              to acquire the services of             of the Council of Europe4 and EU stan-
                                                              a local partner or inter-              dards5. In 2009, Austria introduced a
                                                              mediary when starting or               new special prosecutor for corruption
                                                              conducting their business              and a special prosecution service for
                                              abroad, particularly in CIS countries.                 corruption cases with central jurisdic-
                                              If such local partners use corrupt prac-               tion. The risk of being held responsible
                                              tices, such as bribery, this can cause sig-            for foreign bribes paid via local partners
                                              nificant damage to the reputation and                  or intermediaries will increase as the
                                              finances of the company.                               enforcement of anti-corruption laws in
                                                  The risks are not only of a legal                  Austria becomes more effective.
                                              nature; there may also be commercial                       The new anti-corruption provisions
                                              implications, such as the risk of debar-               penalize employees and agents of pri-
                                              ments and the loss of key investment,                  vate and public companies requesting
                                              employees and customers, not to men-                   or accepting bribes; public officers serv-
                                              tion large fines.                                      ing foreign states or international or-
                                                  When facing allegations of corrupt                 ganizations, if accepting a bribe, may be
by Eva BAUMGARTNER                            practices, a company must be able to                   prosecuted in Austria. Individuals of-
                                              quickly demonstrate various things.                    fering or granting a bribe to employees,
                                              First, that it has used the highest degree             agents of public and private companies
                                              of diligence and care when acquiring                   may be sentenced to up to two years in
                                              the services of a local partner or inter-              prison; individuals bribing public offic-
                                              mediary. Second, that it has sufficient                ers can be penalized by a jail term of up
                                              knowledge and has installed safeguards                 to three years. Furthermore, legal enti-
                                              to ensure that the local partner or inter-             ties can be penalized for offences under
                                              mediary is carrying out the contracted                 the Austrian Criminal Act (including
                                              services in a transparent and acceptable               bribery) by a fine of up to EUR 1.8 mil-
                                              manner. And third, that policies, codes                 lion; the actual fine is, however, calcu-
                                              of ethic and procedures designed to pre-               lated based on a legal entity’s profitabil-
                                              vent bribery and corruption are in place.              ity and financial means.
                                                                                                         Irrespective of the nationality of
                                              Liability of individuals and                           the individual/legal entity commit-
                                              companies: Austria                                     ting a Criminal Act, Austrian courts are
                                                                                                     deemed competent provided (i) the act
                                                 The Austrian Criminal Law Amend-
by Artem V. SOKUROV                           ment Act1 (Strafrechtsänderungsgesetz 2008)            3
                                                                                                       1999 OECD Convention on Combating Bribery
                                              contains new anti-corruption provisions,                 of Foreign Public Officials in International Busi-
                                                                                                       ness Transactions, OECD Doc. DAFFE/IME/
                                              implementing the UN Convention against
                                                                                                       BR(97)20, reprinted in 37I.L.M. 1(1998).
Gudrun Stangl is a partner with               Corruption2, the OECD Convention3, the                 4
                                                                                                       1999 Criminal Law Convention on Corruption of
Schönherr Rechtsanwälte GmbH (Vienna)                                                                  the Council of Europe, ETS No. 173.
Eva Baumgartner is a senior associate         1
                                                Criminal Law Amendment Act 2008 (Strafrech-          5
                                                                                                       1997 Convention drawn up on the basis of
with Schönherr Rechtsanwälte GmbH                tsänderungsgesetz 2008), Official Gazette             Article K.3 (2) (c) of the Treaty on European
                                                 (BGBl) I 2007/109, which entered into force on        Union on the fight against corruption involv-
(Vienna)                                         1 January 2008.                                       ing officials of the European Communities or
Artem V. Sokurov is a senior associate with   2
                                                2003 United Nations Convention against Corruption,     officials of Member States of the European Un-
Schoenherr Ukraine LLC (Kiev)                    United Nations Resolution: A/RES/58/4.                ion, Official Journal C 195, 25 June 1997.

• The Ukrainian Journal of Business Law | September 2009 •                                                                                            33
global legal update |anti-corruption legislation

constituting the criminal offence (in the        All these Acts will come into force on                by its management, shareholder of par-
present case: the bribe) is committed on         1 January 2010. The laws define meas-                 ticipant or other authorized representa-
Austrian territory, or (ii) the result of        ures to prevent corruption, and set out               tive. However, the On Liability of Legal
criminal actions takes place on Austrian         the types of responsibility for corrup-               Entities for Corruption Offences Act does
territory.                                       tion: criminal, administrative, discipli-             not apply to companies of public law
    The anti-corruption provisions of            nary and civil. The acts are generally                which are entirely financed from the
the Austrian Criminal Act are currently          aimed at introducing stricter penalties               state or local budgets, and to interna-
under review by the Austrian Ministry            for offences of corruption.                           tional organizations.
of Justice. Pursuant to press reports,
the introduction of a new provision                                                                      Choosing and working with
by which an individual who has re-                                                                       intermediaries in Ukraine
                                                     Before selecting
ceived a bribe may be exempted from
punishment in case (i) he/she dis-                                                                            Initially, a company aiming to ac-
closes the identity of the individual/                                                                   quire the services of a local Ukraine
corporate who has granted the bribe
and (ii) he/she pays the bribe to the
                                                 an intermediary,                                        partner or intermediary has to under-
                                                                                                         stand the activities for which a local

                                                      the contractor
Austrian prosecution authorities is                                                                      intermediary will be used. A precise
considered.                                                                                              determination of the scope of work
                                                                                                         should be made by the relevant in-
Liability of individuals and                         should pay special                                  termediary. A due diligence review
companies: Ukraine                                                                                       of the candidate should be underta-

    Corruption remains a seri-
                                                          attention                                      ken. Ideally, the due diligence review
                                                                                                         will be carried out by someone other
ous challenge in Ukraine. In 2008
Transparancy International6 rated
                                                              to certain                                 than those selecting the intermediary
                                                                                                         (i.e., the legal in-house team). The
Ukraine7 2.5 on a 10 point scale, a
decrease from 2.7 in 2007 and 2.6 in                    "red flags"                                      company might also consider using
                                                                                                         an external adviser9.
2006.8                                                                                                        Potential conflicts of interest
    Ukraine’s anti-corruption legisla-                                                                   with a possible intermediary should
tion derives from various laws. The                                                                      be documented. If an intermediary
Criminal Code penalizes accepting                    In addition, the abovementioned                   works with a competitor or other com-
bribes, giving bribes and provocation/           acts amend the Ukrainian Codes of                     panies or institutions which constitute
instruction to give bribes, with vari-           Criminal Procedure and of Administrative              a risk for the intended business opera-
ous penalties attached. Foreigners may           Violations.                                           tion, the company should not collabo-
be held liable on the same grounds as                To date, Ukrainian anti-corruption                rate with the intermediary.
Ukrainians. A number of new anti-cor-            legislation and the Criminal Code do not                  Before selecting an intermediary,
ruption bills have been submitted to the         provide for corporate criminal liabil-                the contractor should pay special atten-
Ukrainian Parliament. Unfortunately,             ity, but this will be introduced starting             tion to certain “red flags” that require
mainly due to reasons of a political             from 1 January 2010. A legal entity may               further investigation and could be deal
nature — including the coming presi-             be held liable for bribery on its behalf              killers. These include: (i) agents with
dential election — a lot of bills were re-       and in its interest when it is committed              close family relationships to key official
jected recently or not even considered                                                                 figures; (ii) agents who want to be paid
                                                   External legal advisors or service providers
by Parliament.                                                                                         in cash via a third party or a numbered
                                                    specialized in this type of due diligence inves-
    However, many positive legisla-                 tigation, e.g. TRACE; www.traceinternational.      bank account; (iii) agents recommended
tive steps have been taken. In June-July            org. For a detailed description of the trace       by officials with whom the company is
2009, the Ukrainian Parliament adop-                guidelines and working proceedings in rela-        negotiating; (iv) agents who wish to re-
ted the On Measures to Prevent and Fight            tion to intermediaries in foreign countries also   main anonymous; and (v) agents who
                                                    see A. Timothy Martin, 'Using Consultants in
Corruption, No.1506-VI, On Amending                 Foreign Lands', 59 Inst. On Oil and Gas Law
                                                                                                       want to be paid large amounts of mo-
Certain Laws re Liability for Corruption            501 (2008) by the Center of American and In-       ney in advance.
Offences, No.1508-VI and On Liability               ternational Law.                                       In order to be transparent and legal-
of Legal Entities for Corruption Offences,
                                                    For the adoption of a company ethics code          ly compliant, a consultancy agreement
                                                    please refer to the ICC Rules of Conduct to
No.1507-VI, which were subsequently                                                                    with the intermediary should ideally
                                                    Combat Extortion and Bribery (http://www.
approved by President V. Yushchenko.                include: (i) a precise definition of the
                                                    corruption/Statements/ICC_Rules_of_Con-            scope of work; (ii) fees and payment
6            duct_and_Recommendations%20_2005%20                conditions; (iii) a code of ethics or an
  in_focus/2008/cpi2008/cpi_2008_table.             Revision.pdf) and the Business Principles for      anti-corruption policy:10; (iv) no right to
  See e.g. USAID, 'Final Report on Corruption       Countering Bribery published by Transpar-
  Assessment: Ukraine', February 2006.              ency international (http://www.transparency.
                                                                                                       assign the agreement; and (v) extraor-
  Such ranking corresponds to position 134          org/global_priorities/private_sector/busi-         dinary termination rights related to cor-
  worldwide; Austria ranks on place 12 (2008).      ness_principles).                                  rupt practices.

34                                                                                • The Ukrainian Journal of Business Law | September 2009 •

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