Creative Contracting to Reduce Third-Party Risks (Part III of IV)

by Michael Volkov
Contact

contractMost lawyers are not creative people. After all, there is a reason they went into the law. Lawyers who deal with anti-corruption risks and third parties need to expand their horizons and consider using creative solutions to reduce and minimize risk.

In the anti-corruption compliance arena, many companies are following a standard formula for certifications, representations and warranties. Lawyers involved in these issues have passed around standard clauses they like to use in their agent and distributor contracts.

The “standard” clauses include general representations and warranties that the agent or distributor: (1) has not in the past, and will not in the future violate anti-corruption laws; (2) is not affiliated with any government official (directly or through a close family member); (3) will permit access to the company to conduct audits when needed to ensure compliance with corruption laws and contractual requirements; (4) can be terminated if the company has reason to believe that the agent or distributor has violated (or intends to violate) an anti-corruption law.

All of this is well and good, but I am advocating a more creative approach to reducing risks through contractual provisions. Each situation differs in its facts and circumstances. Depending on the nature of the risk or red flag that is identified, a lawyer’s task is to think outside the box and come up with a certification that addresses that risk.

Here are some examples of what I mean:

1. The potential incriminating fact – Assume that Agent A has been the subject of a foreign government contracting investigation. Press reports relating to the investigation indicate that the foreign agency investigator may have referred the matter for a criminal inquiry or that a lower level official debarred the agent but was eventually overruled and reinstated. In the questionnaire and in a personal interview, Agent A denies there was ever a finding of misconduct by anyone or that it was debarred. The company collects some documentation from Agent A but cannot gain access to all of the internal documents from agency consideration of the matter.contract2

In the absence of corroborating evidence from the documents, the company prepares a representation based on Agent A’s claims/denials. The representation provides two specific protections: (a) if the facts are eventually secured that contradict Agent A, the company may terminate Agent A for misleading the company; and/or (b) if Agent A is alleged to be involved in bribery, the company can demonstrate to the government prosecutors that the company conducted a robust due diligence review of Agent A.

2. The double agent – a government official that partially owns an agent. It is rare but has occurred that foreign government officials are authorized to serve in a foreign government while maintaining a private ownership interests in an agent company/partnership. Assuming that the government official is not in a position to regulate or favor the agent’s contract4business, the company has to design a set of certifications and representations which ensure that the foreign official will not be involved in specific business activities, will not influence, or seek to influence any foreign official through use of his/her position in the foreign government, and will notify the relevant foreign government officials of the specific role of the foreign official in the business.

There are infinite factual situations where creative contract drafting can be used to minimize risk. It is important to address specific red flags and do so with integrity and creativity. Every situation can be addressed –the only question is how and whether such protection is sufficient to outweigh the red flag risk.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

Written by:

Michael Volkov
Contact
more
less

The Volkov Law Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.