Bribery Act Expected to Hit Oil and Gas Industry the Hardest

Michelle Remo, “Big 4″ observer
May 10, 2011 /

Because of its wide distribution in almost all parts of the globe, the oil and gas industry will likely receive the hardest beating from Britain’s Bribery Act according to accounting and consulting firm Ernst & Young.

Under the Bribery Act, which will come into enforcement come July 2011 after several delays, even Christmas gifts of a gold fountain pen or a case of champagne could be construed as forms of bribery according to PricewaterhouseCoopers.

Ernst & Young expects the oil and gas industry to see the harshest impact of the Act because this sector operates in different parts of the globe, citing its susceptibility to corruption as the least reason.

David Lister, partner at Ernst & Young, said in a statement that “it is the nature and locations of their businesses that expose them to additional risk.”

Life sciences and consumer products come next to oil and gas industry, second and third, respectively.

Ernst & Young draws up its ranking from the analysis of bribery cases convicted under the Foreign Corrupt Practices Act of USA in the past 30 years.

The ten top sectors listed by Ernst & Young as the ones that are likely to see the risk of investigation under the Bribery Act include technology, real estate, automotive, telecommunications, asset management, banking and capital markets, and government and mining and metals.

The Serious Fraud Office (SFO), tasked to prosecute companies that may violate the Act, vowed to take a “wider” perspective in discharging its duties. Ernst & Young recommends data available from FCPA convictions as a useful tool that the SFO can use in implementing the Bribery Act.

Based on FCPA court records since 1981, a total of 242 companies have been involved in bribery, with 118 being convicted and 167 being prosecuted. The convictions resulted in 30 civil penalties, 29 financial penalties, and 28 settlements.

Of the total accounted prosecutions, oil and gas players represented the 18 percent, while life sciences and consumer products accounted for the 13 and 12 percent, respectively.

The Bribery Act has been facing left and right challenges from different sectors who argue that its provisions are confusing. Subsequently, its implementation has been moved to July instead of April this year after its passage into law in April 2010.

Critics warned that it could put companies that have weak compliance practices into hot seat even if no evidence could show an act of bribery.

“Despite the additional clarity afforded by Bribery Act recent guidance, the lack of clarity on facilitation payments doesn’t help oil and gas companies, which tend to work in sectors where these business practices still unfortunately remain part and parcel of everyday business,” Lister added.

Justice Secretary Kenneth Clarke previously clarified in March that the Bribery Act will not apply to companies operating overseas, even if they are listed in Britain.


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