Experience shows that, during contractual negotiations, it is not easy to confront an existing or potential business partner with the vexed issue of corruption. It is however an increasingly important issue to address, and one which requires special care. ICC therefore took the initiative to develop a model Anti-corruption Clause, based on international best practice, which corporate lawyers and commercial negotiators are encouraged to include systematically in their contracts. In doing so, companies make the difficult but necessary step from ‘corporate compliance’ to ‘contractual compliance’. This Chapter introduces the ICC Anti-corruption Clause (2012) whose full version can be found in Annex 2 of this Training Handbook.

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ANOTHER BOILERPLATE CLAUSE?

Let’s imagine the following situation: Commercial colleagues of yours have embarked on a sensitive contractual negotiation. They are drafting an important agreement with international ramifications to be concluded with a new and promising industrial partner. Everything happens according to plan and the negotiators are making headway. You hear them say that they have reached the stage of what is erroneously called the ‘legal clauses’ or ‘boilerplate clauses’, which in practice means these end-of-the-contract provisions, such as the ‘Choice of law and jurisdiction’, ‘Arbitration’, and ‘Entire agreement’ clauses. It is now time to decide whether the parties will include or not an anti-corruption clause in the contract.

In fact, your company is relatively confident with its future counterpart, having gone through the usual due diligence procedures. However, nobody in the company has practical experience of doing business with this new partner. You, as a compliance practitioner, should raise the question: “Shouldn’t we introduce in the contract a provision giving the company (and in fact all the parties involved) sufficient assurance about the parties’ integrity?” Even though the candidate partner’s record has been reviewed and everything looks fine, you feel the need to protect the future of the contractual relationship. In introducing an anti-corruption clause, you will protect your company’s integrity record and will ensure a flawless implementation of the contract, free from any corrupt and other fraudulent practices for which your company may be held (indirectly) liable.
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YOUR CLAUSE – MY CLAUSE?

Once the question of the inclusion of an anti-corruption clause has been answered positively, the next question will be: Which provision will you introduce in the contract?

You may try to ‘impose’ the standard clause your company has developed over the years. But in such case, you run the risk of confronting your future counterpart, who may feel overrun and may have the impression that you consider his business conduct model inferior to yours. For instance, a small- or medium-sized enterprise may, not totally without reason, consider that a larger company uses the issue of anti-corruption to pressure it into practices that seem to restrict its freedom of action.

Alternatively, you may decide to opt for the model clause which your new partner is proposing. But the problem there will be that your company has no experience of how such clause will be effective in different (and sometimes difficult) contractual circumstances and you too will be reluctant to ‘submit’ to your partner’s unilateral solution.

Your best option will finally be to use a clause, which is available off the shelf and can be seen as neutral, since it has been developed by the International Chamber of Commerce on the basis of the experiences gained by a great many of companies from different segments of industry and services, and which are active in all parts of the world: the ICC Anti-corruption Clause (2012).

A CLAUSE FOR ALL SEASONS

The ICC Anti-corruption Clause (2012) is an ideal neutral ground on which any party in all contractual relationships should be able to meet. It was prepared by two ICC policy commissions (the Commission on Commercial Law and Practice − which produced the worldwide known Incoterms® Rules − and the Commission on Corporate Responsibility and Anti-corruption) with the straightforward aim of providing the business world with strong and simple contractual provisions, shielding contractual parties from corruptive practices, while at the same time preserving, as much as possible, the continuity of their contractual relationship.

The Clause can be used by large, medium, and small companies alike. It is usable between equals (for instance between two producers) or amongst parties with dissimilar economic strength (such as a principal and an agent or a purchaser and a supplier in a supply chain). Thanks to its neutral character, no party will feel that its integrity model is challenged or considered inferior to the one of the other parties.

Indeed, the ICC Clause should not be perceived as the product of one of the negotiating parties, nor should it be seen as belonging to one defined culture or to one specific legal system or jurisdiction. The Clause should rather be looked upon as the result of the best internationally accepted, up-to-date, and commercially viable integrity practice.
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FROM ‘CORPORATE COMPLIANCE’ TO ‘CONTRACTUAL COMPLIANCE’

Many leading companies all over the world have made considerable efforts to build up their own corporate compliance system, with a view to shielding themselves from the huge damage corruption can inflict. We have described in the successive Chapters of this Ethics & Compliance Training Handbook which measures companies should take to establish an efficient corporate compliance programme. But all these costly, time-consuming efforts could be ruined by a single contractual relationship that turns sour due to non-compliance by one of the parties.

To avoid such kind of damage, ‘corporate compliance’ has to find its logical development in ‘contractual compliance’. Companies should invest not only in their own internal compliance efforts but also in securing compliance by their contractual partners.

These partners, by adopting the ICC Anti-corruption Clause (2012), have to commit expressly to comply with anti-corruption provisions – and in particular with the provisions of Part I of the ICC Rules on Combating Corruption (2011) – and to develop, maintain, and implement a genuine corporate integrity programme.

A CLAUSE BUILT ON TWO PILLARS AND THREE OPTIONS

By introducing the Clause in their contracts, the parties state that they have not and will not use bribes in the context of the contract. If this were to happen, the non-infringing party can bring the matter to the attention of the non-compliant party and require remediation. Failing remediation, the contract can be suspended or terminated at the discretion of the non-infringing party.

The ICC Anti-corruption Clause (2012) is built on two pillars: (i) the determination expressed by parties to ensure anti-corruption compliance in their contractual relationship and (ii) the will to preserve, in that context, the sanctity of contracts through maintaining trust between parties throughout the lifetime of the contract.

In practical terms, three options are open to the drafters of an agreement for including the ICC Anti-corruption Clause (2012):

Option I consists of a shorter version of the Clause. This version incorporates by reference the provisions of Part I of the ICC Rules on Combating Corruption (2011), which expresses the prohibition of all forms of corruptive practices. This Option, which contains four relatively short paragraphs, has the advantage of not overburdening the text of the contract and will therefore be better suited to shorter and less complex agreements.

Option II is based on the incorporation in full of the provisions of Part I of the ICC Rules on Combating Corruption (2011). This Option lists explicitly the whole text of Part I of the ICC Rules. Option II will be preferred by parties who wish to make explicit all the commitments they undertake and will be the optimal solution in longer, more elaborate and complex contracts.
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Option III differs from the two preceding Options, as it is built on another type of commitment. Here the parties declare that they have put in place (or are about to do so) a corporate anti-corruption compliance programme, as described in Article 10 of the ICC Rules on Combating Corruption (2011). The commitment by the contractual parties is of another nature than the one under Options I and II but should reach the same objective: Maintaining integrity throughout the lifetime of the contract (and even thereafter).

A USEFUL COMMENTARY

The parties may incorporate the Clause by referring to its full name but any reference in their contract to the ‘Clause’ or related variations shall be deemed to be a reference to the ICC Anti-corruption Clause (2012).

A useful, explicit and detailed commentary is attached to the Clause, giving precise guidance as to how to interpret the provisions of the Clause in specific circumstances.

To give two examples, the commentary explains which type of evidence a party should produce in case an infringement of the anti-corruption provisions is alleged or which kind of remedial action can be undertaken by the non-complying party to repair the situation.

WHAT ABOUT SANCTIONS?

Setting up a new contractual anti-corruption compliance system would be meaningless without the introduction of a serious sanction in case of infringement.

And what would be, in the context of a contractual relationship, a more efficient deterrent than the suspension or termination of the contract at the discretion of the non-infringing party? Hitting the infringing party in the wallet, through the suspension or termination of the contract, is probably the most effective civil penalty one can inflict in these circumstances. But this will be allowed only after having given the non-complying party the opportunity to remedy the situation.

A BALANCE BETWEEN CONTINUITY OF CONTRACTS AND BUSINESS INTEGRITY

The harshness of the sanction imposed in case of infringement should not, however, change the parties’ perception of the ICC Anti-corruption Clause (2012): The aim of the Clause is not sanctioning in itself but is, very much to the contrary, the promotion of integrity in contractual relations (before the entering into force of the contract, throughout the course of the contract, and thereafter) between all the parties (including subcontractors, agents, and other third parties).

In other words, the drafters of the Clause were aware that there should be a balance between the genuine efforts of the parties to fight corruption and the treatment of corruption as a breach of a contract justifying its termination.
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OPTIONS I AND II

This balance between the principle of continuity of contracts and the strong commitment to actively ensure integrity in contractual implementation is underlined by the following elements, contained in Options I and II of the Clause:

  1. An infringement under the Clause will only be considered relevant if it consists of material or several repeated breaches of the provisions of Part I of the ICC Rules on Combating Corruption (2011);
  2. Such infringement should be concerned with the very contract itself and not with other contracts concluded between the same parties, or any other contracts;
  3. Evidence of an infringement can be brought (a) through the conclusions of a contractually-provided audit of the other party’s accounting books and financial records (b) or by bringing other evidence, which does not have to be corroborative but which should be sufficient to prove that suspicions are not invoked in a vexatious or otherwise unjustified manner;
  4. The allegedly infringing party will be allowed to take the necessary remedial action curing the situation in a reasonable time after having been notified by the other party; and
  5. The allegedly infringing party may invoke a defense by proving that, by the time the evidence of breach(es) had arisen, it had put into place adequate anti-corruption preventive measures, as described in Article 10 of the ICC Rules on Combating Corruption (2011).

OPTION III

Similarly, in Option III, the following items are indicative of a fair balance between the parties’ desire to give the contract its full effect and their wish to maintain integrity throughout the contractual term:

  1. The parties declare that they have put in place a corporate compliance programme, as described in Article 10 of the ICC Rules on Combating Corruption (2011);
    This programme should be adapted to each party’s particular circumstances and should be capable of detecting corruption and of promoting a culture of integrity in the organization of the party concerned;
  2. The corporate compliance programme has to be maintained and implemented by each party at least throughout the lifetime of the contract and each party will have to inform the other party on a regular basis about the programme’s implementation through statements prepared by a qualified corporate representative, whose name will have been communicated to the other party;
  3. If a party becomes aware that the other party’s qualified corporate representative’s statements contain material deficiencies, undermining the efficiency of that party’s programme, it will notify the latter party accordingly;
  4. A party invoking a deficiency in a qualified corporate representative’s statements must bring evidence that either such statements are
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    missing or that a statement contains materially untrue, false, or incomplete declarations;
    Such evidence does not have to be corroborative but must be sufficient to prove that suspicions are not invoked in a vexatious or otherwise unjustified manner; and
  5. The party, whose statements are alleged to be deficient, will be allowed to take the necessary remedial action curing the situation in a reasonable time after having been notified by the other party.
    Necessary remedial action might include providing a new, accurate, complete, and sincere statement, giving a full and fair picture of the implementation by such party of the provisions of the corporate compliance programme, as well as any corrective action this party will take to improve such implementation.

A CLAUSE FOR MORE INTEGRITY IN CONTRACTS

It is ICC’s hope that the Anti-corruption Clause (2012) will become general practice, as is the case of the many other model contracts and clauses produced by ICC over the years, such as the ICC Force Majeure Clause and the ICC Model Confidentiality Agreement.

Compliance practitioners, company lawyers and other corporate officers in charge of audit and control should encourage their colleagues in charge of managing their company’s industrial or commercial relations to adopt the Clause as a matter of routine in all significant contracts executed by their company.

This will help anti-corruption not being restricted to law books, corporate Codes of Conduct or statements by Chief Executive Officers and becoming a daily business reality.

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About the author

François Vincke is a Member of the Brussels Bar. He worked 26 years for PetroFina, a European oil, gas and petrochemicals company, including 11 years as Secretary General and General Counsel. Since 1994, he is the Head of Anti-corruption at ICC, first as Chairman of the Anti-corruption Commission and later as Vice-Chair of the Commission on Corporate Responsibility and Anti-corruption. He wrote a number of articles and gave numerous conferences on matters related to ethics and compliance.