The Impact of Anti-Corruption Laws on M&A and Joint Ventures

1. The Impact of Anti-Corruption Laws on M&A and Joint Ventures David G. Glennie Partner Blake, Cassels & Graydon LLP London, UK Mark Morrison Partner Blake, Cassels & Graydon LLP Calgary, Canada

2. Overview The Bribery Act (UK) in brief The FCPA (US) in brief The CFPOA (Canada) in brief The Bribery Act and FCPA compared Case Study and Scenarios The Role of Local Counsel

3. Bribery Act • Bribery Act 2010 (UK): 4 bribery offences • offering a bribe • receiving a bribe • bribing a foreign public official • the failure of a company to prevent bribery on its behalf • All 4 offences can be committed by individuals and corporations • Maximum of 10 years imprisonment for individuals • Unlimited fines for corporations • Potential for the confiscation of property (disgorgement) • Potential disqualification of directors under English statute

4. The FCPA • Foreign Corrupt Practices Act (U.S.): • prohibits the bribing of foreign public officials in the attempt to gain a business advantage • contains books and records and internal controls provisions applicable to issuers • provides for both civil and criminal penalties and is enforced by both the SEC and the DOJ • strong compliance efforts may be a mitigating factor but do not constitute a recognized affirmative defense • employees of state-owned or controlled entities are generally considered foreign public officials • enforcement facilitated by Dodd/Frank whistleblower provisions • five year statute of limitations

5. Bribery Act vs FCPA • Similarities include: • both prohibit bribery of foreign public officials while neither authorize prosecution of the relevant foreign public official • each carries the potential for massive corporate fines and disgorgement of profits • both provide for possibly far-reaching extra-territorial application • Differences include: • the Bribery Act covers both domestic and foreign bribery as well as both bribing and being bribed • “adequate procedures” is an affirmative defense for companies that fail to prevent bribery from taking place under the Bribery Act • the Bribery Act has no books and records or internal controls provisions

6. The CFPOA • Corruption of Foreign Public Officials Act (Canada) • Criminal anti-corruption statute with prohibitions very similar in scope to the FCPA (i.e. prohibits the bribing of foreign public officials in the attempt to gain a business advantage) • unlimited fines for corporations • maximum term of imprisonment of 14 years for individuals • includes a criminal (but not civil) books and records provision • applies to the acts of Canadian corporations and citizens regardless of where committed • no statute of limitations applicable • employees of state-owned or controlled entities considered to be foreign public officials

7. Case Study and Scenarios • Facts: • Multi-billion dollar project for the construction of a LNG liquefaction and export facility in Africa • Multi-party joint venture forms to bid on associated EPC contracts • In an attempt to secure bid award, JV members agree to make payments to public officials responsible for awarding EPC contracts • JV members decide to engage multiple third party agents in overseas jurisdictions as conduits for payments • Alternatively, JV members hire a well-connected local entrepreneur as “adviser” for a large success-related fee and don’t ask questions about what he does to encourage a positive response • JV awarded the EPC contracts and payments endure over multiple years and various phases of LNG facility, including expansions

8. Case Study and Scenarios • Consider a potential acquirer of one of the JV partners: • What due diligence of the target should be conducted in respect of foreign corrupt practices risk/liability? How should this be carried out? • What is the successor liability of the purchaser upon acquisition of a target with foreign corrupt practices liability? • What is the appropriate course of action where target foreign corrupt practices are discovered pre-acquisition? • What is the appropriate course of action where target foreign corrupt practices are discovered only post-acquisition?

9. Case Study and Scenarios • Consider a potential acquirer of one of the JV partners (cont’d): • What contractual representations, warranties, covenants, conditions precedent, audit rights, indemnities and/or termination rights are prudent to protect an acquirer against foreign corrupt practices risk/liability? • What differences, if any, are applicable in the case of an asset acquisition as opposed to a share acquisition in respect of foreign corrupt practices risk/liability? • What can a possible target do to protect its acquisition value in the case of exposure to foreign corrupt practices risk/liability?

10. The Role of Local Counsel Uniquely situated to conduct due diligence and interview key individuals both in respect of due diligence and risk mitigation (front end) and in the event of any specific liability investigation (back end) Can assist with due diligence investigations (either front-end or back-end) being conducted by third party service providers (e.g. Kroll, Veracity, Red Flag Group) Able to opine on local laws, including in respect of (i) anti-corruption principles, and (ii) consequences of violation, including penalties, disgorgement and forfeiture of assets Can provide advice regarding the local enforcement landscape, regime and authorities, as well as political climate Can act as a liaison with relevant local government agencies, prosecutors and police investigators, where needed Must be independent of any local governmental influence or conflict of interest related to the corruption risk at hand