JOHANNESBURG - On Monday Business Day reported that ArcelorMittal SA had "appointed a team of lawyers to investigate whether Imperial Crown Trading (ICT) engaged in corruption in its securing of prospecting rights over Kumba Iron Ore's Sishen mine. The team will soon subject key individuals at ICT to a hearing in order to establish whether there is any risk of corruption."
ArcelorMittal is bound by the US Foreign Corrupt Practises Act and if either of its two deals involving ICT were found to be in contravention of the Act could find itself having to pay massive fines. Below are extracts from ArcelorMittal SA's own anti-corruption guidelines. Readers can draw their own conclusions of whether the ICT deals will sail easily through these stringent requirements. - Politicsweb
Extracts from ArcelorMittal South Africa's anti-corruption guidelines:
ANTI-CORRUPTION GUIDELINES
As an international company listed on several stock exchanges, ArcelorMittal wishes to ensure that in the course of its work its employees and any third parties acting on its behalf observe the highest standards of integrity. These Anti-Corruption Guidelines establish procedures for handling corruption concerns.
THE ARCELORMITTAL CODE OF BUSINESS CONDUCT
ArcelorMittal has a reputation for honesty and integrity in its management practices and in its business transactions that it wishes to maintain. It is therefore vital for the ArcelorMittal group to fight and prevent corruption in all its forms.
It is the policy of ArcelorMittal and its subsidiaries and affiliates to comply with anti- corruption laws wherever it does business, including the anti-corruption convention of the Organisation for Economic Co-operation and Development (OECD Convention)1, the European Council's Penal Convention on Corruption of January 1999, and the anti-corruption laws of the countries in which it does business, including the U.S. Foreign Corrupt Practices Act (FCPA)2.
The obligation to comply with local, national and international laws and regulations applicable to its business, including anti-corruption laws, is also contained in the ArcelorMittal Code of Business Conduct.
It is the responsibility of each and every director, officer and employee in the ArcelorMittal group, and any third party acting on behalf of the ArcelorMittal group, to understand the Code of Business Conduct and these Anti-Corruption Guidelines and to seek help from the Legal Department if and when there is any question or doubt as to how these rules apply in a given situation.
LEGAL ENVIRONMENT
In 1999, the OECD (defined above) adopted the Convention on Combating Bribery of Foreign Officials in International Business Transactions (the "OECD Convention"), which concluded that bribery in business transactions:
- raises serious moral and political concerns,
- undermines good governance and economic development, and
- distorts international competitive conditions.
All countries that are members of the OECD have adopted legislation which criminalises the bribery of government officials, including foreign government officials. Similar conventions have been adopted by other international bodies, including the United Nations Convention Against Corruption, the African Union's Convention on Preventing and Combating Corruption and the Criminal Law Convention on Corruption of the Council of Europe.
The FCPA (defined above) applies to the ArcelorMittal group primarily as a result of the listing of ArcelorMittal's shares on the New York Stock Exchange.
In addition to the above conventions and the FCPA, nearly all countries outlaw the bribing of their own government officials. Although a particular action or payment might be lawful under legislation implementing a convention or the FCPA, it might not be lawful under local law.
WHAT IS CORRUPTION?
In practice, the words "bribery" and "corruption" are generally used interchangeably.
Corruption is defined as the misuse of power by someone to whom it has been entrusted, for his own private gain. The most common form of corruption is bribery, which is the giving or receiving money, a gift or other advantage as an inducement to do something that is dishonest, illegal or a breach of trust in the course of doing business.
The anti-corruption laws prohibit an offer, payment, promise to pay or authorisation of payment of any money, gift, or anything of value to any government official for purposes of:
- influencing any act or decision of the government official,
- inducing him or her to do any act in violation of his or her lawful duties,
- securing an improper advantage, or
- inducing him or her to use his or her influence with a governmental agency, in order to assist in obtaining or retaining business or to direct business to anyone.
The "obtaining or retaining business" element is interpreted broadly to include business advantages, such as obtaining a permit or a tax break.
In addition, according to the laws applicable in some countries such as those that have ratified the Criminal Law Convention on Corruption of the Council of Europe, corruption is considered a criminal offence even in the event that the payment of a bribe would not be made in order to assist in obtaining or retaining business. In other words, the act of corrupting someone in order to induce him or her to act or refrain from acting in the exercise of his or her functions is considered a criminal offence.
This means that unlike the US FCPA, the law of those countries (which include Luxembourg, where ArcelorMittal is incorporated, as well as the UK and France, where ArcelorMittal has corporate offices), makes no exemption for the so-called facilitation payments.
Facilitation payments are a form of bribery where (i) the sum involved is minor and paid to a low level official and (ii) the payment is made to secure an action or service to which an individual or company is routinely and legally entitled (e.g. routine processing of government papers such as a visa).
Consequently, it is possible that ArcelorMittal could face liability if any part of the Group were to contravene those laws.
It is the policy of ArcelorMittal to refrain from making any corrupt payments, including facilitation payments.
ArcelorMittal employees asked to make facilitation payments should report such incidents to the local Legal Department.
WHO IS A GOVERNMENT OFFICIAL?
A "government official" is:
- an officer or employee of a government (holding an administrative, judicial or legislative mandate) or of a department, agency or instrumentality thereof or any person acting in an official capacity for or on behalf of such government (e.g. an entity hired to review bids on behalf of a government agency or to collect custom duties);
- an officer or employee of a "public international organisation" or any person acting in an official capacity for or on behalf of such public international organisation (Public international organisations include, for example, the United Nations, the World Bank, the European Commission, etc.);
- an employee of a company or other business entity in which a governmental body has an ownership interest and/or over which such governmental body may, directly or indirectly, exercise a dominant influence (such employee can qualify as a government official even if he or she is engaged in commercial, rather than governmental, activities); and
- a political party (see Section "Political Contributions" below) or a member of a political party or a candidate for political office.
- Additional caution should be applied in respect of persons who are known or suspected to be family members of government officials or in respect of companies who are controlled by family members of government officials so as to avoid that these persons serve as a conduit for an illegal payment to a government official.
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BUSINESS PARTNERS, AGENTS, CONTRACTORS AND OTHER THIRD PARTIES
It is prohibited (i) to make any corrupt payments through intermediaries and (ii) to make a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a government official. The term "knowing" includes conscious disregard and deliberate ignorance.
All business decisions involving ArcelorMittal should be based on merit. No ArcelorMittal employee or third-party acting on behalf of ArcelorMittal should exert improper influence on government officials.
ArcelorMittal's policy is that the joint ventures in which it participates adopt and enforce anti-bribery policies.
ArcelorMittal must undertake due diligence on its business partners (whether they are agents, consultants, suppliers, other intermediaries, consortium or joint venture partners, contractors or major sub-contractors, distributors, etc.) with a view to assessing the corruption risk before engaging in business with them. For example, before engaging an agent, you should be comfortable that he/she will not be used as a conduit for the payment of a bribe. After conducting due diligence on the agent, you should refrain from engaging in business with them if the due diligence findings are not satisfactory.
The due diligence must be conducted in accordance with the principles set out in these Guidelines and any other policies tailored to specific business/risk areas.
ArcelorMittal must establish whether any of its business partners have a reputation for corruption (even though they may not have been convicted for corruption yet) or if any of its business partners are being investigated or prosecuted, or have been convicted or (in the case of lawyers) debarred, for corruption. If so, ArcelorMittal should ascertain as far as possible the facts of the case and make a determination on that basis, keeping in mind the risk of reputational damage to ArcelorMittal.
Records of each due diligence check must be kept for a period of at least eight (8) years.
In addition, depending on the results of the background check and the sensitivity of the matter, ArcelorMittal may use external providers to perform additional or more ind epth due diligence on individuals or corporate entities.
The following principles should be applied in respect of the use and remuneration of all third-parties:
1. Payments to third-parties must be reasonable and rationally reflect the value of the services provided;
2. Third-parties should have a proven track record in the industry concerned;
3. Third-parties should not be referred by government officials;
4. The services to be rendered must be legitimate and the nature of the services as well as the price must be described in the relevant contract; and
5. Third-parties may not get paid offshore unless there are genuine and legitimate business reasons for doing so and the payment process is approved in writing in advance by the local Legal Department, the Regional General Counsel and the local head of Business Unit. Tax avoidance is not a proper purpose in such cases.
Each third-party agreement must include clauses that address corruption concerns.
These Anti-Corruption Guidelines apply to agents and business partners when they do business with us and if they do business with a third party on our behalf.
ANTI-CORRUPTION CLAUSES
The inclusion of the anti-corruption model clause provided under Appendix A of these Guidelines or a similar clause developed with the assistance of the Legal Department is required in each type of contract referred to in these Guidelines.
MERGERS AND ACQUISITIONS
Companies in the ArcelorMittal group which merge with or acquire other companies run the risk of inheriting successor liability for any violations of anti-corruption laws committed by the acquired or merged company.
This may entail significant reputational damage for ArcelorMittal and business disruption as well as sanctions if at a later stage such violations come to light. Therefore, it is essential to perform thorough anti-corruption due diligence and to include in the acquisition contract appropriate anti-corruption provisions as well as to consider other available options to avoid successor liability prior to the closing of the transaction.
While acquisitions solely of assets theoretically do not trigger successor liability, it is nonetheless important to perform thorough anti-corruption due diligence and tailor the acquisition contract in such a way that it excludes liability for anti-corruption laws violations from the scope of the asset acquisition. If an ongoing business is acquired as part of an asset acquisition, such a transaction must be treated as if it were a stock acquisition. You should raise any anti-corruption issues that arise in due diligence with the Group General Counsel.
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ANTI-CORRUPTION SANCTIONS
Criminal liability and civil penalties
In most jurisdictions, both companies and individuals can be liable for a criminal offence. The exact extent of criminal liability will depend on the law of a particular country.
Generally speaking, criminal liability entails fines and prison terms which can be severe. For example, under the FCPA (as defined on page 1), business entities are subject to a fine of up to USD 2 million per violation. Officers, directors, shareholders, employees and agents are subject to a fine of up to USD 250,000 per violation and imprisonment of up to five years. Alternatively, the fine may be up to twice the benefit that the defendant sought to obtain by making the corrupt payment.
Further, criminal penalties for companies like ArcelorMittal accused of violating the Books and Records (i.e. accounting - see "Accounting Requirements", above) provisions of the FCPA can reach up to USD 25 million and up to twice the benefit the entity sought to obtain through the violation. Individuals convicted of such a violation will be fined up to USD 5 million or imprisoned for up to 20 years.
In addition, disgorgements of profits associated with improper payments are likely to be imposed under the FCPA.
Companies and individuals may be prosecuted for corruption in their home countries, in the country where the corruption took place, and in other countries, including the United States of America. Extradition of individuals to another country is also a risk, depending on the country where the actions took place.
Fines imposed on individuals may not be paid by their employer.
Civil liability and damages
In addition to criminal liability, both individuals and companies involved in corruption are at risk of being sued and being found liable to compensate those other individuals or companies who may have suffered losses as a result of the corrupt act.
This may occur where, for example, an unsuccessful bid participant sues a successful bid participant who has been corruptly awarded a contract in order to recover lost tender costs and lost profit.
Suspension or Debarment
In addition to direct sanctions for corruption, companies involved in enforcement proceedings may be prohibited from making sales to government customers or organizations. Loss of such sales opportunities in many cases can have a greater financial impact on a company than the direct sanctions of the enforcement proceeding.
Sanctions taken by ArcelorMittal
Based on these Anti-Corruption Guidelines, applicable law and ArcelorMittal internal policies, instances of fraud or bribery by an ArcelorMittal employee are punishable and will result in sanctions that may include the termination of the employment contract.
Source: ArcelorMittal South Africa (PDF)
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