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The Importance of Anti-corruption Clauses in International Contracts

Working with commercial agreements can pose challenges in ensuring compliance with best practices for anti-corruption. Considering the various sets of laws globally, it is important to note the differing obligations across jurisdictions and the varying definitions of what constitutes corruption and who may be considered corrupt.

Anti-corruption clauses play a vital role in fostering integrity and minimizing risks in international contracts, designed to deter and address corrupt behaviors, thereby encouraging ethical and transparent conduct among parties involved. By including such clauses into commercial agreements, companies showcase their commitment to legal compliance and social accountability, thus fostering a more dependable and sustainable business environment.

Furthermore, such clauses provide legal certainty to the contracting parties. They establish clear standards of conduct, outlining what actions are permissible and what constitutes a breach. Consequently, they diminish uncertainty and the risks associated with unlawful practices, safeguarding the interests of companies and bolstering trust between business partners. In an increasingly interconnected global landscape, the adoption of such clauses is imperative for upholding the reputations of organizations and fostering ethical standards in international business.

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History of Anti-corruption Legislation in the US and Its Impact on the World

In the 1970s, the United States enacted the Foreign Corrupt Practices Act (FCPA), a groundbreaking legislation in the international fight against corruption. This Act was created to address cases of bribery of public officials, both within the US and abroad. The Watergate scandal, which led to its approval, implicated over 400 North American companies engaged in questionable payments to foreign authorities to facilitate business ventures abroad. The FCPA not only heightened penalties for entities engaging in corrupt activities but also instituted provisions to ensure the accuracy of financial records and promote transparency in corporate finances. This Act exerted a significant influence worldwide, serving as a model for similar laws enacted in numerous countries.

As a result, the FCPA played a pivotal role in restoring the reputation of US companies and catalyzing a global shift in the approach to corruption. Its legacy endures to this day, encouraging the adoption of ethical practices, compliance programs, and the promotion of integrity in international business relations.

Reflection of the Influence on the Brazilian Legal System and the Importance of Anti-Corruption Acts as Legal Basis for the Insertion of Anti-corruption Clauses

The influence of the FCPA on the Brazilian legal system was profound. In 2013, the Brazilian Anti-Corruption Act (Law #12,846 of August 1, 2013) was enacted to address a legal gap in the application of anti-corruption measures within the country. This Act is often likened to the FCPA and the UK Bribery Act, as well as the standards established by the OECD Anti-Bribery Convention. Brazilian laws have introduced greater stringency in holding companies accountable for corrupt practices, instituting penalties, and encouraging the implementation of compliance programs. Thus, the FCPA played a fundamental role in inspiring and shaping the Brazilian legal framework to combat corporate corruption.

The definitions given by the law lead to a significant improvement in the effectiveness of anti-corruption clauses in a commercial agreement. This legal foundation now stands as robust as international standards for businesses operating within Brazilian jurisdiction, placing Brazilian companies on par with the highest compliance standards and integrity in commercial relationships.

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Detailing Obligations of Contracting Parties: References to Relevant International Treaties and Foreign Anti-Corruption Act

Incorporating foreign laws and international treaties into anti-corruption clauses in Brazilian contracts is an essential practice to ensure compliance and prevent unlawful practices. While Brazilian law dictates that the obligations of agreements are governed by the laws of the country in which they are signed, it is common practice, in international contracts, to include references to foreign standards and relevant treaties to bolster anti-corruption clauses. For instance, the Brazilian Anti-Corruption Act can be complemented with the FCPA and the UK Bribery Act to establish more rigorous codes of conduct and obligations. Furthermore, international treaties such as the UN Convention against Corruption and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions play a role in shaping and implementing anti-corruption clauses, promoting global alignment in the fight against business corruption.

This approach enables contracting parties to embrace the best international practices, adapting to global business landscapes and boosting the effectiveness of anti-corruption clauses. Consequently, the amalgamation of Brazilian laws, foreign standards, and international treaties fosters the development of robust, ethical contracts which align with the highest international standards of integrity.

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Effectiveness of Foreign Anti-Corruption Acts in Brazilian and Foreign Contracts

Even when the legal validity of a foreign law within Brazilian contracts is questioned, it is important to recognize that a contract serves as an agreement between parties, inherently capable of establishing rights and obligations, whether this is the right to receive a product, the obligation to make payments, or compliance with a foreign law. While contracts typically outline the applicable laws and jurisdiction for dispute resolution, it is important to understand that adherence to foreign anti-corruption laws specified in a particular clause carries accountability and the potential for sanctions. The anti-corruption clause should always be a non-negotiable provision in the contract, its violation being subject to its immediate termination.

It is important to emphasize that in today's globalized business landscape, compliance with foreign anti-corruption laws not only enhances a company's credibility but also shields it from potential sanctions in jurisdictions like the US, where the FCPA applies to foreign companies conducting business or having ties within American jurisdiction regardless of where the corrupt activity occurs.

One notable example is the case of Deutsche Bank¹, which in 2021 reached a settlement worth 130 million dollars with the US Department of Justice for maintaining false financial records between 2009 and 2013, aimed at concealing, among other things, payments to consultants without proper documentation of rendered services. Notably, a payment to a Saudi consultancy, owned by the spouse of a decision-maker, was greenlit despite awareness of this relationship, facilitating a payment exceeding 1 million dollars to said decision-maker. Deutsche Bank employees openly discussed the need to pay the company in order to encourage the husband to conduct business with the bank.

Additionally, the bank contracted a consultancy in Abu Dhabi which lacked qualifications for the task, despite from the familial relationship with the decision-maker. Indeed, the consultant merely acted as an intermediary for the decision-maker, who received 3 million dollars without proper documentation.

Solely related to violations of the FCPA, the company incurred a financial penalty amounting to 79,561,206 dollars.

A comprehensive clause based on key domestic and international laws unequivocally demonstrates the parties’ commitment to combating corruption in international business dealings, underscoring the aspiration for an ethically sound agreement and the concern to meet international standards, thereby instilling trust in its brand and reducing risk in its agreements.

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