On 25 April 2014, the Court of Appeals in Vaasa, Finland dismissed bribery charges brought against a manager (the “Manager”) of Wärtsilä Group (“Wärtsilä”) as well as the prosecutor’s claims for imposition of corporate fine and confiscation of criminal proceeds against Wärtsilä.
According to the dismissed charges, the Manager gave bribes to the CEO of a leading electricity distribution company in Kenya in 1999–2001 in order to induce the CEO to act in Wärtsilä’s favor both during and after the negotiations for a Kenyan power plant project.
According to the Court, Wärtsilä’s foreign subsidiary had, in accordance with a 1997 consultancy agreement, paid millions of British pounds to an offshore company, whose Kenyan CEO, at the time of the payments, was a foreign public official, as defined in the Finnish Criminal Code and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
By virtue of the Finnish Criminal Code currently in force, foreign public officials include persons who exercise public authority on behalf of foreign states, public international corporations, bodies or courts as well as soldiers. The definition is somewhat open to interpretation.
The Court of Appeals dismissed the charges against the Manager because the prosecutor had not shown that the Manager:
- had personally participated in the effecting of the payments (Wärtsilä’s foreign subsidiary had effected the payments in agreed stages as prescribed by the consultancy agreement);
- had known at the time of concluding the consultancy agreement—or at the time of the payments—that the Kenyan CEO was the owner of the offshore company; or
- had known or should have known that the Kenyan CEO was a foreign public official.
Because the charges against the Manager were dismissed, the claims against Wärtsilä were likewise dismissed.
If the verdict becomes final, it will have value as a precedent. It should be noted, however, that the outcome of the case was impacted by the fact that bribery of a foreign official was criminalized in Finland as late as 1 January 1999.
One cannot draw the conclusion, based on the case, that to promise or offer a benefit to a public official by way of concluding an expensive consultancy agreement in an attempt to influence the actions of the public official or to do so in circumstances conducive to influencing them, is not punishable so long as the perpetrator does not personally effect the agreed payments.
In our opinion, the outcome of the case could have been the exact opposite if the consultancy agreement had been concluded on or after 1 January 1999. Because it was concluded as early as 1997, the Court was unable to consider the possible underlying intent to bribe. It could only consider the relevance of making the agreed payments in 1999–2001.
According to the judgment, Wärtsilä customarily retained the services of consultants in connection with its Kenyan projects simply because Wärtsilä lacked the necessary support of a local organization. It can be read between the lines that concluding consultancy agreements is perfectly acceptable in such circumstances. However, the Court does not appear to have considered whether the consultancy agreement had in practice been a so-called Facilitation Payment Agreement.
Notwithstanding the above, the consultancy agreement was concluded in circumstances which appear dubious. The Manager stated in court that two potential consultants whom he knew had offered their services. He had nonetheless concluded the consultancy agreement with the offshore company because a person—who remained a complete stranger to the Manager and whose name he did not remember—had at his own initiative, approached him at a hotel in Nairobi and offered the consultancy services on behalf of the offshore company.
The lesson of the case is that having effective anti-bribery compliance programs in force is important companies. If consultancy agreements are necessary in foreign projects, the identity and background of the consultants and the owners of their companies should be investigated in order to ascertain whether they fall under the definition of foreign public officials. Doing so may of course prove difficult.
If a Finnish company conducts business in the UK, it should also abide by the quite severe UK Bribery Act which, amongst other things, prohibits the use of Facilitation Payments and enables criminal proceedings to be brought against the company even if the alleged bribery has no direct connection to the UK.
Whether the prosecutor will apply for leave of appeal and whether the Finnish Supreme Court will hear the case both remain to be seen.