ANTI-CORRUPTION AND COMPLIANCE IN THE ENERGY SECTOR

RC: Could you provide an overview of anti-corruption enforcement activity in the energy sector? What trends have been prevalent over the last 12-18 months?

Lister: While anti-corruption enforcements have been seen across a variety of industries, the energy sector has experienced more bribery enforcement actions than any other. According to Trace International’s 2013 Global Enforcement Report, approximately 20 percent of all foreign and domestic enforcement actions to date have occurred in this sector, including numerous high profile cases. In the last 18 months, we have seen significant fines being levied on energy companies for bribery and corruption breaches. In 2013 the French oil and gas company Total S.A. had to pay $398.2m to settle its FCPA charges, and the Swiss oil services firm Weatherford $152.8m. Both of these are among the most costly FCPA settlements to date. Energy companies often have complex supply chains, and many recent enforcement actions, particularly in the US, have related to parent companies being held responsible for the behaviour of their agents and intermediaries when performing services on behalf of the parent or local subsidiary. Both the Total and Weatherford cases involved improper payments being made via intermediaries.

RC: Why is the energy sector among those most susceptible to corruption risk? Could you highlight any recent cases of note, and their outcome?

Lister: There have been a number of multi-million dollar settlements in recent years by some of the largest energy companies, however this sector cannot be characterised as more corrupt or susceptible to corruption risk. That said, there are particular characteristics of this sector that increase the risk of bribery and corruption. Given the industry usually operates under a tender process, the incentive to pay bribes is often high – for example, energy contracts are often long term with very large potential rewards, therefore individuals may perceive that the potential reward outweighs the risk of paying a bribe to win this contact.

Jul-Sep 2014 Issue

EY