Top 8 Guidelines to Make Mining Companies FCPA Compliant in Seeking Social Permission

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The key question whenever a mining operation provides something of value to a traditional authority is whether and when this conduct threatens to trigger the U.S. Foreign Corrupt Practices Act’s (“FCPA’s”) prohibition against bribery of foreign officials. We set the context in Part One of this article.

Put another way, will the gift or financial support likely be viewed by US enforcers as intended to improperly influence the traditional authorities?

Part of the answer to this question will depend on how the US Department of Justice prosecutors, already focused on investigating the mining industry, will come down on the threshold question of whether the particular traditional authority qualifies as a “foreign official.”

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DOJ’s recent shift in focus to enforcement actions involving developing countries where traditional authorities routinely exercise considerable influence over social, familial and business matters adds additional incentive to proceeding with great caution.

That’s why we made a list of 8 Guidelines to Live By for mining companies.

Traditional Authority or Foreign Official? Days of One-Size-Fits-All Are Over

While many experts and practitioners, perhaps in the customary abundance of caution, once favored treating any and all traditional authorities as “foreign officials,” that position can fairly be described as somewhat unrealistic, in that it unjustifiably imposes a blanket ban that hinders many mining companies’ activities. This approach, moreover,is not compelled by either the FCPA’s plain language, nor its legislative history.

That said, USDOJ guidance and recent enforcement efforts teach that mining companies need to proceed with great caution when dealing with traditional authorities who, for example, have close personal, professional, or familial connections with the local government, or who engage in quasi-governmental activities.

8 Guidelines to Live By

Here are some fundamental factors we believe companies should consider in assessing whether a traditional authority, such as a tribal leader, will be viewed as qualifying as a “foreign official” under the FCPA:

  • Functions. Does the traditional authority perform purely ceremonial functions or is he or she empowered to perform traditional governmental functions (such as officiating at marriages, adjudicating land and other disputes, etc.)?
  • Formal/actual status. What is the traditional authority’s formal and real- world status?
  • Government membership or agency. Does the traditional authority hold him/herself out as a member of, or agent or, the foreign government, whether at the national, regional, provincial or municipal level?
  • Government-granted privileges or obligations. What are the traditional authority’s privileges and obligations under applicable local law?
  • Government “employee”? Can the traditional authority be said to be an employee of a state-owned or controlled entity or otherwise connected to a foreign official?
  • Discretionary authority. Is the traditional authority’s permission or approval required by law (or in practice) in order to obtain permits, concessions or rights from the foreign government?
  • Compensation. How does the traditional authority earn, and from whom is the compensation received?
  • Government assistance. Does a foreign government subsidize or administer the tribe or other traditional community?

As with many aspects of FCPA enforcement, the search for practical, bright-line rules allowing for predictable outcomes will yield little, and definitive answers are in short supply. That said, the foregoing questions are the right ones to ask, and will put mining companies on the right path towards determining whether additional inquiry, care, and sensitivity are required.

Guest Contributor T. Markus Funk is a partner in Perkins Coie’s White Collar and Investigations Practice. A former Assistant U.S. Attorney and USDOJ Resident Legal Advisor in the Balkans charged with combating corruption, Markus now serves as the Co-Chair of the American Bar Association’s Global Anti-Corruption Committee and regularly provides compliance and investigations counseling to multi-national mining industry clients. Markus is also the lead appellate counsel in United States v. Esquenazi, the first-ever challenge to the constitutionality of certain FCPA enforcement practices (a ruling on appeal is pending).

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