International Aspects of Business Law - Essay Example

? International Aspects of Business Law of Submitted by s: Introduction The possibilities of operating or conducting business in the international market and around the world have increased tremendously for businesses, especially those trading with the United States (Cavusgil and Knight 2009). Similarly, at the same time and in the same conditions of conducting business in the international market, there exist serious obstacles which include bribery and corruption in relation to transactions in international businesses. Whereby, corruption is the use of public office for private gain while the broad approach contains abuse of not only public office but private or commercial one too (Rand 2000). There are three categories of corruption cases, which can be political, personal or commercial in nature, but the basic difference lies in the office, authority and position, which are neglected, and intent of manipulations. Further there is political corruption, which may include bribery, use of governmental offices for private enrichment and changing of how decisions are made by public bodies (Heidenheimer, Johnston and Le Vine 1989). On the other hand, bribery is an act of corruption that entails obtaining money or any form of monetary gain, or the making of payments illegally through abuse of public or commercial office and funds. This payment does not necessarily involve the exchange of money, but can also be through gifts, special favours or influence and despite the form it takes, corruption is always a transaction that goes in two ways involving two parties that is the briber and the one who receives the bribe. In relation to the case study Mullet Inc. though incorporated in US intends to secure a contract to supply computers to Central Bank of Acacia, however it is faced with the challenge of contravening international business laws on corruption and bribery by giving the board of directors a celebratory dinner for it to secure the contract. The payment of this dinner is a form of bribery to the board members by the negotiating team for them to accept to continue and finalize the business contract. This paper will seek to advise the Mullet Inc. negotiating team of their legal liabilities by giving in to the Chairman of the Acacia bank demands under US FCPA in comparison to the UK Bribery Act. The U.S. Foreign Corrupt Practices Act This Act of 1977 outlaws American corporations from making any payment deemed as bribery or inducements to overseas representatives with the intent of winning or keeping business (U.S. Department of Commerce 2004). This statute was enacted to put a stop to the act of bribing officials from foreign countries as well as restoring the confidence of the American investor in the integrity of the American business system and, has been amended twice in 1988 and in 1998 with the changing dynamics in businesses (Rutchfield and Lacey 2000). The U.K. Bribery Act 2010 Studies by independent audit firms such as Ernst & Young and Confronting Corruption show that firms and businesses in the United Kingdom have been making tremendous losses due to corruption and bribery. These are termed as barriers to growth and trade and overseas corruption makes it even harder and expensive do businesses abroad. The United Kingdom government has therefore strengthened its laws by enacting the Bribery Act 2010 that came into operation on July 1, 2011 creating a number of offences relating to corruption in international businesses. This law outlawed the bribing of a foreign official, giving, or promising an advantage when dealing with international business transactions (De Jonge 2011, p. 136). The U.K. Bribery Act 2010 also created an offence of acceptance, demanding, or assenting to receive an advantage or benefit or failing to stop a bribe from being paid on behalf of a firm or a company. Case Study Analysis of the Celebratory Dinner Request under UK Bribery Act and FCPA Public/private sector The FCPA prohibits giving of bribery only to foreign public officials; on the other hand, the UK bribery Act has a broader cover as it entails both public and private or commercial briberies crimes. Therefore, if Central Bank of Acacia board members were only serving in the bank and had no affiliations to the Acacia government, then under FCPA the negotiating team would have had no fear, however other US legislations still would have come into place. Nevertheless, board members of Acacia are still key government officials and therefore negotiating team stands to be liable for bribery. The scope of the Bribery Act is bigger as it prohibits bribery to both the public officials and private individuals with intent to induce them to act improperly as defined in section 4 of the Act, and thus under this Act Mullet Inc. would have been liable for an offense in both cases. Prohibitions The basic law as provided by the Foreign Corrupt Practices Act (FCPA) prohibits any acts of bribery and makes it illegal for any firm or any employee associated with it to bribe with anything of value, or to authorize any such promise to any foreign official for the sole objective of earning or retaining business. Therefore, the negotiating team is prohibited to make payment concerning the celebratory dinner under the FCPA as it amounts to bribery to gain business (Dahms and Mitchell 2007). While the UK Bribery Act prohibits three acts of bribery, which are paying and receiving of bribes by private individuals, bribery to public foreign officials and the failure of a company to have put adequate controls to prevent bribery. Therefore, Mullet Inc being a US company is under the FCPA, which states that it is an offence to offer bribes to public officials. Hence, the company would be liable for a bribery offense perpetuated by the negotiating team unless it can prove it had instituted the appropriate control measures to prevent bribery incidences (Parker-Battle and Vital 2012). Jurisdiction Territorial scope The Foreign Corrupt Practices Act (FCPA) covers any person who is deemed a citizen, national, or resident of the United States, or any firm, business partnership, association that has its main place of conducting business in the United States. It also covers those business entities that are organized and managed under the laws of a state that is part of the United States, or a territory, possession, or commonwealth of the United States referred in the Act as domestic concerns. The Foreign Corrupt Practices Act (FCPA) also makes it illegal or unlawful to make or offer payment to any person while having the knowledge that a part of it has been promised to be offered to any foreign national with the purpose of assisting a business to obtain or retain a business (Parker-Battle and Vital 2012). The UK Bribery Act has the same territorial scope as the FCPA in that the Act covers UK companies, offenses carried outside the UK by people who are closely associated with UK under Section 12(4). In addition, the Bribery Act S.1 extends to non-UK companies if they conduct business with UK institutions even though they have no physical offices in UK. Hence, under both the legal systems in UK and US the negotiating team would face a liability for bribery. This is considering that Acacia is a US incorporated company it falls under the jurisdiction of the FCPA rule barring US companies from involving in acts of bribery and corruption either directly or through associated persons similar to the negotiating team which is acting on behalf of the Mullet Inc. In case of the company was incorporated in the UK it would still be liable for a criminal offense for participating in bribery to public officials, as it would fall under UK companies and the negotiating team members would be UK citizens both whom fall under the jurisprudence territory of the UK bribery Act. Facilitation Payments and Bona Fide Business Expenditures There are some exceptions to offences of bribery and corruption under FCPA when the facilitation payments made are allowable under acceptable and legalized in the country the transaction takes place both unlike the UK Act under S.6 that prohibits them and defendant could be liable especially if their intention is to obtain or retain business (Bombach, Navarro and O’neill 2010). These exempted facilitation costs include any business expenses that are directly related to the advertising, demonstration or clarification of products or services, or expenses that are meant for expediting the execution or performance of a contract with a foreign government or agency. In relation to our case study the celebratory dinner is neither a directly related expense to the Mullet Inc., nor is it an expense that is meant for the execution and performance of the contract, therefore cannot fall under the corporate hospitality and facilitation payments, and thus liable for bribery offence under both the FCAPA and the UK bribery Act. However, it is arguable that the celebratory dinner expense could be termed as a business entertainment offered to the negotiating team, but the intent to secure contract and future business with the government makes it a bribery offense under UK Act. Considering the case for celebratory dinner being a business entertainment, the negotiating team will have to prove that the expense was a genuine company expense that is directly related to the promotion its products and hospitality of its client, and prove that it was not a corrupt intent. Who bears the Liability? The Bribery Act prohibits both passive and active acts of bribery this implies that Mullet Inc and the Central bank of Acacia would be liable for an offence. However, under FCPA only Mullet Inc. would be liable for an offence of bribery as it only recognizes active bribery actions involving payment of bribes to foreign public officials to gain or retain business. Considering that, the negotiating team is obligated to pay for the celebratory dinner to the board members in order to gain the business contract, this amount to bribery under both the FCPA and the UK bribery ACT. This is because under UK bribery Act the celebratory dinner is meant to induce the Central Bank of Acacia board members to give Mullet Inc. the business to supply computers, amounting to bribery on the part of the negotiating team in order to obtain business under FCPA. In addition, under both cases it would be verifiable that the negotiating team accepted to pay the bribe of celebratory dinner in order to attain the business contract and that Mullet Inc. may be in a better position to obtain government contracts in Acacia under FCPA, thus inducing the board members to act improperly under Bribery Act. Fines and Jail Terms According to section 11 of the UK bribery Act any person such as the negotiating team who are guilt of bribery offense can be imprisoned for up to 10 years, and under section 7 of the Act companies that fail to take measures to prevent corruption and bribery offences are subject to undetermined fines. Furthermore, considering that the Bribery Act is a criminal statute, Mullet Inc. if convicted of a bribery offense could face debarment as indicated in the UK Public Contracts Regulations 2006. Moreover, for the associated persons who undertake to bribery on behalf of a company there is an attached liability especially the senior or management in case it can be proved that a bribery offense was carried out with their knowledge and consent. Therefore, if any member of the negotiating team is a senior manager at Mullet Inc they could be liable for a bribery offense under the UK Ac. since the bribery would be carried out with their agreement and knowledge. On the other hand, Violations of FCPA could result in criminal and/or civil penalties whereby for criminal violations there will be fines, imprisonment, or both while for civil violations there may be fines, imprisonments or fines for the offender as well as the payment of pecuniary damages for the defendant who succeeds in his claims (Bruce 2001). For instance, criminal penalties to the negotiating team in case any of them is a “control person” under the FCPA could be up to $2,000,000 in addition to being imprisoned for five years for every bribery offence carried out. Furthermore, Mullet Inc could be faced with other penalties such as civil fines, private actions, and debarment amongst others under other US laws. Analysis of the Plane Seat Request under UK Bribery Act and FCPA The request made by Acacia Central bank president that if there is a seat in Mullet Inc. private to be offered to his daughter on her way to study in US, cannot be termed as a bribery offense if the negotiating team accepts. This is because the request to have a seat is either directly or indirectly made with intention to seal the business contract unlike the celebratory dinner at the Seven Star Hotel in the capital of Acacia. Thus, under FCPA the bribery accusation in case the negotiating team accepts to this request would not stand since the court cannot prove that the action was done solely to retain or obtain business. This is because the team could accept to it on a goodwill capacity and still fail to achieve the contract if they fail to pay for the celebratory dinner requested by the Acacia Central bank Board Chairman. On similar grounds, under UK Bribery Act the court would not be in a position to prove the offer was accepted to wilful induce the president of the bank to act improperly or the intention to gain the business contract. Conclusion In conclusion, the request from the Chairman of the board as per the analysis is intended to seal the business contract, and thus the negotiating team will be availing it in order to obtain a business deal. Thus, considering that the board members are still government officials, under FCPA the negotiating team and Mullet Inc. the company they represent will be liable for bribery offense to public officials. In addition, the dinner expense is in no way exemptible under FCPA as a facilitation expense because it is not an expense made to expedite or facilitate the smooth completion and execution of the contract, rather it is a means to induce the board to accept to offer Mullet Inc the contract to supply the computers. Thus, the negotiating team should reject to the proposal made to pay for the dinner as it amounts to bribery offense and could make both the negotiating team members and their company Mullet Inc liable for imprisonment of five years and a fine of up to $2 million under FCPA. However, in case the negotiating team would be in a position to prove that the celebratory lunch request is a bona fide company expense under business entertainment to its clients, then it would be allowable under the exception provisions of the FCPA. Furthermore, the team should note that their acceptance of the request made by the president does not in any way amount to bribery, as it is not meant to achieve any business with the bank, nor induce him to act improperly. Therefore, in general business such as Mullet Inc. conducting business internationally should be aware of the legal systems that are used in their international markets, failure to which they may face legal risks that may have a negative impact on their business and success. References Bombach, K., Navarro, L., & O’neill, L. 2010. The long arm of the U.K. Bribery Act. National Defense, 95(685), 59. Bruce, Z., U.S. 2001. 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