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Alexandra Wrage
President and Founder, TRACE

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Lee Nelson
Independent Compliance and
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Jessica Tillipman
Associate Dean for Government Procurement Law, The GW University Law School
  • Writer's pictureLee Nelson

Tune-Up Time: Revitalizing Template Anti-Bribery Compliance Clauses

Man Putting Money in Pocket

There is no time like the present to review and update the anti-bribery compliance (ABC) clauses in your organization’s contract templates. Beware of entrusting this task to Legal department colleagues who work frequently with the templates. They may not be as knowledgeable about ABC laws and requirements and they may not have the interest either, especially if ABC clauses are not considered to be ‘central’ to dealmaking. Whatever! Elbow your way onto the server and gather your organization’s templates to read and consider whether the ABC clauses or other provisions need revitalizing to sufficiently address the ABC risks – from low to medium to high – of the line of business, country or territory, and any business relationship for which they are used. Here are a few tools that may be useful in conducting your template tune-up:


Start by comparing the template wording to model ABC clauses. TRACE member companies have access to model clauses drafted by a group of experienced in-house compliance officers. Budget permitting, you also can ask outside counsel to review your ABC clauses.


Templates should address the business and legal risks determined by your organization’s on-going risk assessment. Regarding bribery-related risks, templates for low-risk deals generally contain ‘no-bribery’ and ‘books & records’ clauses; mid-risk templates tend to add clauses concerning sub-contractors and agents as well as audit rights; and templates for high-risk deals add still more, such as clauses regarding government ownership, former gov’t employees, and reporting of potential violations.


The most common and probably most important ABC clause is the ‘no-bribery’ clause – a warranty not to engage in bribery or corruption. Be forewarned that international parties often refuse to agree to this clause if it requires them to comply with non-local laws such as the FCPA or UK Bribery Act. If this is a frequent issue for your organization (and even if it is not), consider using a clause that instead specifies the conduct prohibited by the relevant ABC law(s). For example, the party(ies) can agree or warrant ‘not to, directly or indirectly through any third party, promise, offer, provide or pay, anything of value to . . .’


Be sure to read the entire document to be certain that standard contractual obligations will not negatively impact your organization’s overall ABC risk profile. Check these obligations in particular:


  1. Limitation of Liability: Claims and damages arising from ABC risks or violations should be excluded from any liability cap.

  2. Indemnification: Should include a duty to defend and hold harmless against claims or damages arising from the other party’s (or its agent’s) alleged or actual violation of anti-bribery laws.

  3. Termination: Suspected or actual violations of anti-bribery laws should trigger a right of immediate termination.


After revitalizing the template ABC clauses, it is important to announce to stakeholders that the templates have been updated, where to find them, and request they use them going forward. Do not assume your Legal Dept colleagues understand ABC clauses or the risks generally. Provide in-person or on-screen training that explains them and be ready for a lot of questions.


Start by walking your audience through the ABC clauses and other contractual obligations discussed above with a focus on the reason for and goal of each provision. Also, have a frank discussion about ‘fallback’ positions for each clause that are acceptable and the conditions under which that softer approach can be offered and agreed. This is the sort of practical training they will not soon forget. You also will have shown that ABC clauses are in fact ‘central’ to your organization’s overall risk management efforts.



Lee Nelson

Independent Compliance and Ethics Attorney


 

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