BRIBE, FACILITATION PAYMENT OR COMMISSION?

Bribe, facilitating payment, commission – when is a payment ethical or unethical?

Until 1992 bribery in South Africa was a common law crime (i.e. for which there is no actual legislation). The Corruption Act (No. 94 of 1992) repealed both the common law crime of bribery and the previous Prevention of Corruption Act (No. 6 of 1958), and created a new offence called corruption which included the common law crime of bribery and the offences created by the 1958 legislation. This is currently addressed by the Prevention and Combating of Corrupt Activities Act (No. 12 of 2004).

Irrespective of sound legislation, bribery is such a regular topic in our press that it appears, unfortunately, to be a regular occurrence. By way of example, the report into corruption within the Johannesburg Metropolitan Police Department, which was released in April this year by Corruption Watch, revealed that half of Johannesburg Metro Police officers have solicited bribes, and one in four of the city's motorists has paid a bribe. In May this year the Mail & Guardian revealed the first evidence suggestive of bribery in the R26-billion Gautrain contract. Their report claimed that more than a quarter of a billion rand was paid as a ‘commission’ to a Tunisian fixer, and that the money came from Canadian multinational Bombardier Transportation, the lead partner in the Bombela consortium that won the tender in 2005 to build and operate the Gauteng rapid-rail system. Although there is no specific evidence of onward flow to politicians and officials, the report acknowledges that the Bombardier payment is remarkably similar to the billion rand in commissions – which investigators regard in part as intended bribes – spent by Britain’s BAE Systems during the controversial arms deal.

Bribery – the offering, giving, receiving or soliciting something of value to influence the actions or decisions of an official or other person - is regarded as both illegal and unethical. The bribe may take many forms: money, a gift, an advantage, or a promise or undertaking to induce or influence the action, vote, or influence of a person in an official or public capacity. As these ‘payments’ can be labeled under many different names, it is not always that clear what is or isn’t ethical. A commission earned on sales is generally considered acceptable, but what about the ‘commission’ paid for the Gautrain contract? Are facilitating payments, introductory fees, agency fees or handling fees ethical or unethical?

The question is often further complicated when differing social and cultural norms are taken into account. The tendency to treat a bribe as acceptable because it is commonly practiced in a particular country or an industry is flawed: just because ‘everyone’ is doing it, does not make it right nor does it invalidate applicable legislation. The recent disclosure of kickbacks paid in the auction industry is but one example. Added to that, it may also not read well when a company’s practices are reported elsewhere. The company that pays bribes, for example, in Russia or Nigeria may find itself accused of misconduct by stakeholders in London and Washington.

A panel of experts have shared their views on what makes one payment acceptable (and ethical) and another unethical.

Michael Judin, Senior Partner, Attorneys Goldman Judin Inc., a member of the King III Committee and a Director of and Legal Advisor to the American Chamber of Commerce in South Africa

Some countries, such as for example the USA, make specific exemptions in their legislation for facilitation payments or, as they are also sometimes known, ‘grease’ payments. However, there is no such exemption under the United Kingdom Act and as such these types of payments are unlawful in the UK. Facilitation payments are small payments demanded by officials to provide a service that they are obligated to perform. Payments are, in most instances, found to be acceptable where they are made under fear of the loss of life, limb or liberty where the briber is likely to have available to him the common law defence of duress. This is even more likely where the person making the payment was in a vulnerable position.

Reams have been written of when is a bribe not a bribe? Is it justifiable to bend the rules to save the lives of many? Should you refuse to pay a bribe when it may in result in someone dying? It is easy to answer the question objectively in the comfort of your boardroom. Subjectively and in different circumstances the payment that you wish to make may look very different. But the law is clear and one can but hope that one never comes face to face with the questions that I have posed above and is obliged to answer them. I am reminded of the famous words of Dan Demis the American writer/lawyer who wrote “Do not condemn the judgment of another because if differs from your own. You may both be wrong”.

Ansie Ramalho, Chief Executive, Institute of Directors in Southern Africa (IoDSA)

As a society we accept fair reward for goods or services. The lines get blurred when a ‘referral fee’, an ‘introductory fee’ or ‘facilitation fee’ is paid. The question is under which circumstances this can be regarded as acceptable and when not from an ethical perspective. Clearly when such payment is illegal, it will also be unethical. In the event that there is not a prohibition in black and white, as the IoDSA we propose that the following be considered: the amount of the fee, the nature of the service and transparency. If the amount paid is excessive in comparison to the service rendered, it should raise a red flag. The next question that should be asked is whether the nature of the referral, introduction or service is such that it over-shadows valid considerations such as merit. And lastly, the litmus test is whether the payment of the fee can withstand the scrutiny of objective third parties.

Willem Punt, Group Ethics Officer for First Rand Group

A common, mostly commercial, form of corruption is bribery: a bribe is a reward or a promise of a reward that results in inappropriate influence and undue benefit accruing to the bribor (the giver) and the bribee (the receiver).

So the simple test questions are: Is there inappropriate influence? Upon proper disclosure will others still trust the fairness or just nature of the transaction(s)? Is there undue benefit? Did the parties, especially the bribee, receive a benefit that they are legitimately entitled to?

By Cynthia Schoeman