30 July, 2012
Legal News & Analysis – Asia Pacific – Japan – Regulatory & Compliance
Overview
Between January and October 2011, Japan accounted for 34% of all foreign direct investment projects from the Asia Pacific region, making it the region’s most prolific outward investor during this period. Analysts believe that the trend is likely to continue as a result of a desire to increase energy security following the Fukushima nuclear crisis, an aging and shrinking domestic market, and a concern to meet competition from China.
In the light of this, it will be increasingly important for outward investing Japanese companies to be aware of both international and domestic anti-corruption regulations. Historically, Japan has been slow to investigate and prosecute foreign bribery cases. It has been criticised by the Organisation for Economic Co-operation and Development (“OECD”) on this account and urged to do more to comply with its obligations as a signatory of the OECD Convention on Combating the Bribery of Foreign Public Officials in International Business Transactions. According to the OECD’s June 2010 report, Japan reported only eight enforcement actions concerning overseas bribery between 1999 and 2009. Notwithstanding this, Japan achieved a positive rating in Transparency International’s 2011 “Bribe Payers Index”.
Recent international corruption cases
Recent FCPA investigation regarding bribery of Nigerian government officials
In April 2011, a Japanese company was ordered to pay US$218.8 million to resolve charges relating to a joint venture established to conduct business in Nigeria. Each of the four companies in the joint venture was sanctioned by the DOJ in relation to the bribery of Nigerian government officials to obtain engineering, procurement and construction (“EPC”) contracts. In total, over US$1.7 billion in penalties and forfeiture orders have been levelled against the joint venture partners and other persons allegedly associated with the scheme.
The joint venture in question was awarded four EPC contracts between 1995 and 2004 to build liquified natural gas facilities on Bonny Island, Nigeria. The contracts were valued at more than US$6 billion.
In January this year, it was also announced that a Japanese trading house will pay a US$54.6 million criminal penalty for its role as agent to the joint venture and, pursuant to a two-year deferred prosecution agreement, accept a corporate compliance consultant for two years. The prosecution illustrates the broad reach of the FCPA. Even though the bribery was alleged to have occurred between a foreign company and a foreign official, the DOJ was able to charge the foreign trading house on the basis that it aided and abetted a US domestic concern in violating the FCPA.
Anti-trust violations and conspiracy to bribe government officials in Latin America
In September 2011, the DOJ announced that a Tokyo-based company had pleaded guilty to anti-trust violations and conspiracy to bribe government officials, and would pay a criminal fine of US$28 million. The DOJ said that the bribery, which occurred between 1999 and 2007, involved the authorisation and approval of payments to employees of state-owned entities in Latin America, in order to obtain and retain business in respect of marine hoses.
The company was also subject to a cease and desist order and surcharge payment order by the Japan Fair Trading Commission in 2008 in respect of the bid rigging activity.
Recent domestic corruption case
In November 2011, a former managing director at a trading company specialising in defence products lost his final appeal to the Supreme Court and was sentenced to one year and six months’ imprisonment with labour for bribing the former Deputy Minister of Defence, Takemasa Moriya. The Deputy Minister was given gifts including cash and golfing weekends from 2005 to 2007 in return for favours relating to supplies for Japan’s Self-Defence Forces. The Deputy Minister received a sentence of two years and six months’ imprisonment with labour and fines of approximately JPY 12.5 million.
For further information, please contact:
Mark Johnson, Partner, Herbert Smith