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Anti-Corruption Provisions and Upstream Joint Ventures--Boilerplate or Bespoke?


The use of anti-corruption provisions in oil and gas contracts is widespread and a number of precedent clauses have been developed by international and industry organisations in an attempt to establish a market standard. This drive towards standardisation can mean that such provisions are often considered part of the ‘boilerplate’ of a contract and do not receive the attention they deserve. This is a particular concern given that the emphasis of such ‘standard form’ anti-corruption provisions often differs quite considerably from one issuing organisation to another.

This article considers the role that anti-corruption provisions play in the context of the “adequate procedures” defence under the Bribery Act 20101 (the “Act”) and examines how the drafter could approach the various different standard form anti-corruption provisions available to the oil and gas industry.

Failure to Prevent Bribery Under the Act

Section 7(1) of the Act introduced a new strict liability corporate bribery offence. An offence will be committed by a relevant commercial organisation if a person associated with it bribes another person intending to obtain or retain business or an advantage in the conduct of business for such commercial organisation. The phrase “person associated with it” is deliberately opaque. Section 8 of the Act defines it as referring to a “person who performs services for or on behalf of” the commercial organisation. This could include employees, agents and subsidiaries but could also extend to consultants, contractors and joint venture partners. While a detailed examination of the various elements of the offence is beyond the focus of this article, what is important to note is the unique defence that is available to a commercial organisation where one of its associated persons has engaged in an act of bribery – Section 7(2) of the Act provides that a full defence will be available to the commercial organisation if it can prove that at the time the act was committed it had adequate procedures in place to prevent such associated person from committing bribery.

The concept of “adequate procedures” covers a wide range of bribery prevention procedures. In February 2012, the Ministry of Justice issued guidance on the procedures which commercial organisations should put into place to discourage their associated persons from bribing (the “Guidance”).2

The Guidance offers six guiding principles: proportionate procedures; top-level commitment; risk assessment; due diligence; communication and training; and monitoring and review. The overriding emphasis of the Guidance is that these principles are not prescriptive – the way in which an organisation should implement the Guidance is expected to vary from one to another. The anti- corruption steps that an organisation might be expected to take could include the adoption of compliance programmes and policies setting out the organisation’s anti-bribery stance, the creation of risk assessment and due diligence procedures and the provision of training to its employees and associated persons.

In addition to these internal compliance measures, the inclusion of an anti-corruption provision in a contract should also be considered as an anti-corruption measure to be taken by an organisation to protect it against prosecution for the actions of its associated persons outside the organisation: joint venture parties, contractors and other third parties. An anti-corruption provision serves a number of purposes: it demonstrates a commitment by the organisation to the prevention of bribery, it sends a strong signal to the relevant counterparty that bribery and other corrupt practices will not be tolerated by that organisation but it also creates some important contractual protections for that organisation in the event that its counterparty is found to be involved in bribery.

There is no prescribed form of anti-corruption provision set out in either the Act or the Guidance. Organisations could look to international practice and to industry practice for guidance on the scope, rights and remedies that should be included in such a provision. 

International Practice

A number of international organisations have provided advice and guidance on appropriate anti- corruption procedures as part of the global drive to eradicate corruption from society. This guidance includes the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997) and the United Nations Convention against Corruption (2003).

One organisation that has taken this a step further is the International Chamber of Commerce. In 2012 it issued the ICC Anti-Corruption Clause,3 with the stated aim of “creating trust and preventing ... contractual relationships from being affected by corruptive practice”. The ICC Anti-Corruption Clause3 contains two contractual alternatives which the parties can select to include in a contract.

Options I and II

The first alternative contains undertakings by the parties to comply with Part 1 of the ICC Rules on Combating Corruption 20114 (these are set out in Option I and Option II). There is no substantive difference between Option I and Option II. Option I allows the parties to incorporate the ICC Rules on Combating Corruption 2011 by reference, whereas Option II sets them out in full.5

Unlike the Section 7 offence under the Act, the ICC Anti-Corruption Clause draws a distinction between the personnel of a party and third parties associated with that party. An absolute undertaking is given by each party in respect of itself, its directors, officers and employees, whereas a party is only under an obligation to use “reasonable measures” to prevent its subcontractors, agents or other third parties subject to that party’s control or determining influence from engaging in corruption or corrupt practices. In line with Section 7 of the Act, the ICC Anti-Corruption Clause provides that a party will have a defence where it can prove that it had in place adequate anti-corruption measures at the time of an alleged breach.

Option III

The second alternative creates a significantly less onerous undertaking by the parties. Where Option III is selected, each party commits to put in place and maintain a corporate anti-corruption compliance programme adapted to its particular circumstances and capable of detecting corruption and of promoting a culture of integrity in its organisation.

The Option III alternative could well appear to be inadequate, particularly when viewed against a number of the other standard form provisions. However, it is important to bear in mind the recommendations offered in the Guidance. A basic anti-corruption provision, such as the ICC’s Option III, may be appropriate in a contractual relationship where there is a very low risk of bribery. The critical issue for an organisation to bear in mind is whether the procedures it puts in place are proportionate to the risks it faces.

Regardless of whether the parties select Options I, II or III, a breach of the ICC Anti-Corruption Clause will give rise to contractual remedies for the innocent party. If the breaching party fails to or is unable to remedy the breach within a reasonable period, then such breach will entitle the innocent party to suspend or terminate the affected contract.

Industry Practice

In its Bribe Payers Index Report 20116, Transparency International found that the oil and gas industry ranked in the bottom 25% of a survey of the business sectors least likely to pay bribes. Given the prevalence of bribery and corruption in the industry, a number of organisations have been proactive in developing industry-specific anti-corruption provisions. These include international industry organisations like the Association of International Petroleum Negotiators (the “AIPN”) and organisations which are more jurisdiction-specific, like Oil and Gas UK (“OGUK”).

A detailed comparison of the standard form provisions recommended by the AIPN and the OGUK highlights the very different emphasis that these two organisations have given to their respective anti-corruption provisions. For this, the anti-corruption provisions used in the model form AIPN Joint Operating Agreement (the “AIPN JOA”)7 and the model form OGUK Joint Operating Agreement (the “OGUK JOA”)8 have been compared below. 

Scope of the provisions

Under both the AIPN JOA and the OGUK JOA, all of the parties are required to warrant and covenant that they have not and will not engage in corrupt acts. However the formulation of these warranties and covenants varies considerably. This is largely driven by the fact that the original stimulus for the provision in the AIPN JOA was the US Foreign Corrupt Practices Act 1977 rather than the Act. Under Article 20.1.A of the AIPN JOA the basic warranties and covenants are drafted narrowly and optional provisions must be selected to ensure that the provision is sufficiently broad to cover the additional scope of the Act: passive bribery as well as active bribery, and private-to-private bribery as well as the bribery of foreign public officials.

By contrast, under Clause 22.4.2 of the OGUK JOA the warranties and covenants are drafted widely. Each party agrees that it has not and will not commit bribery. Bribery is defined as anything that would amount to an offence under applicable bribery laws.

The OGUK’s approach ensures that anything that would amount to an offence under applicable bribery law is covered, notwithstanding changes to those laws. The AIPN’s approach also achieves this but only where the optional provisions are also selected. As such, the AIPN’s approach allows the parties to enter into a much narrower undertaking with less scope to change as bribery legislation evolves over time.

Another important difference between the anti-corruption provisions in the AIPN JOA and the OGUK JOA relates to the maintaining of adequate internal controls. Article 20.1.D of the AIPN JOA provides that each party must devise and maintain adequate internal controls and prepare and maintain the necessary books and records. By contrast, under Clause 22.4.3 of the OGUK JOA these obligations are imposed on only the operator (or any party providing services in connection with joint operations).

Arguably, both approaches should achieve the same result insofar as ensuring that adequate procedures and suitable record-keeping occurs in respect of activities carried out under the contract. However, the emphasis of the two is noticeably different. The AIPN JOA creates a presumption that any party to the joint operating agreement should maintain adequate internal controls, regardless of the level of activity that will be recorded by that party. By contrast, the OGUK JOA approach is much more activity focussed. It assumes that the primary party who will be required to observe these obligations is the operator, as the principal procurer of services on behalf of the joint venture. Under the OGUK JOA, if a party to the joint operating agreement does not (directly or through an affiliate) provide any service to the joint venture then the obligations regarding adequate procedures and record-keeping will not apply. For a non-operator, the OGUK JOA position is likely to be preferable. It means that a non-operating party can avoid the expense and inconvenience of putting in place the required internal controls in connection with the joint operating agreement.

Monitoring compliance

Another distinction between the approaches taken by the AIPN and OGUK is the way in which they ensure ongoing compliance with the anti-corruption undertakings given by the parties. Under the AIPN JOA there is an optional provision whereby the parties can require periodic certification from the other parties that each has complied with the warranties and covenants under Article 20.1.A of the AIPN JOA in the previous 12-month period.9 This reflects the emphasis in the Guidance on ongoing monitoring and review. There is no such certification mechanism offered under the OGUK JOA.

Another mechanism used to monitor compliance of associated persons is the right to audit. Under the AIPN JOA there is an obligation for each party to respond promptly and in reasonable detail to any reasonable request for information from any party regarding an anti-corruption investigation or proceeding associated with the operations and activities under the joint operating agreement. However, there are no specific rights of audit for a party over and above the standard audit rights in respect of the joint account.10 By contrast, the OGUK JOA offers an extensive optional right of audit which is specifically designed to allow one or more non-operators, or a designated third-party auditor, to audit the operator’s accounts and records to determine whether those books are compliant with their own anti-bribery policies and procedures.

Although this right of audit for a non-operator exists under the AIPN JOA, the approach taken by this optional provision in the OGUK JOA more clearly demonstrates compliance with the requirements of the Act. OGUK’s approach more clearly aligns with the emphasis in the Guidance on the importance of financial and commercial controls, transparency of transactions as well as the ongoing monitoring and review of anti-bribery procedures.

Removal of the operator

The OGUK JOA deliberately elects not to offer express rights for the joint venture to remove an operator where there has been a breach of the anti-corruption undertakings in the joint operating agreement. Instead the OGUK JOA notes in its accompanying guidance to the anti-corruption provision that:

“there are existing provisions enabling removal for material breach which would be applicable in the event of any significant breach of the provisions of the ABC clause”.

As a consequence, the joint operating committee will need to establish not only that there was a breach of the anti-corruption provisions under the joint operating agreement in order to remove an operator from the joint operating agreement on the grounds of corruption but also that a breach of the anti-corruption provisions under the joint operating agreement was sufficiently serious to constitute a material breach of the operator’s obligations.

The operator-friendly position taken by the OGUK is unlikely to be a comfortable position for a party taking a non-operated interest under a joint operating agreement. Arguably, the AIPN JOA offers better protection in this respect. Optional Article 4.10.F in the AIPN JOA allows the parties to include express operator removal rights in the event that the operator has either admitted allegations concerning violations of anti- bribery laws or it has been finally adjudicated/ determined that there has been such a violation. This alternative means that a non-operator avoids the inconvenience and difficulty of having to demonstrate that a material breach has been committed by the operator. It provides a much more objective termination right which allows a non-operator to distance itself from the controlling influence of an operator tainted with corruption violations.

Breach and indemnification

Under Article 20.1.C of the AIPN JOA each of the parties undertakes to indemnify the other parties for any losses they suffer as a result of the admission of allegations of a violation, or the final adjudication that there has been a violation, of the anti-bribery laws applicable to that party. The OGUK JOA does not replicate this express right of indemnification. Instead, the only indemnity which could be available to a party under the OGUK JOA is under Clause 22.2.2. This provision provides that a party may seek indemnity from another party where it incurs liability to a third party as a result of the breaching party’s Wilful Misconduct.

The Wilful Misconduct threshold is a high one. A party would need to establish that the act of the breaching party was:

“an intentional or reckless disregard by Senior Managerial Personnel of Good Oilfield Practice or any of the terms of this Agreement in utter disregard of avoidable and harmful consequences”

and was not excused by either the good faith or emergency action carve outs to a party’s liability.

This indemnification right demonstrates how the AIPN JOA places a much stronger focus on keeping the non-breaching parties whole in the event of a breach of anti-corruption undertakings. By contrast, the emphasis under the OGUK JOA is to ensure that a non-breaching party avoids liability under the Act where its associated person (the breaching joint venture party) has potentially exposed it to liability.


Both the AIPN JOA and the OGUK JOA take the view that it is unnecessary to include a specific termination right in the event of a breach of an anti-corruption undertaking in the joint operating agreement by a party. The approach of both agreements is that the withdrawal mechanism offers a more appropriate remedy for a party than a right to terminate the joint operating agreement. This is in line with the principles articulated by a number of anti-corruption organisations: that a balance must be struck between the efforts to fight corruption and the improper exploitation of corruption as a justification for terminating contractual arrangements.11

The withdrawal mechanism allows a party to surrender its interests in the joint operating agreement and relevant concession by giving notice to the other parties of its intention to withdraw. The right of withdrawal is typically not a right that a party will exercise arbitrarily or lightly. There are a number of inherent drawbacks for the withdrawing party in doing so:

In a scenario where one party has breached its anti-corruption undertakings in the joint operating agreement, a joint venture party may have no option but to exercise its right of withdrawal so as to distance itself from a relationship with a corrupt joint venture party. The OGUK JOA’s anti-corruption provision makes no attempt to redress this imbalance. Once again the emphasis of the OGUK JOA relies heavily on the innocent party being able to rely on the “adequate procedures” defence and does not seek to offer compensation to an innocent party if it suffers the misfortune of finding itself in joint venture with a corrupt partner.

By contrast, the AIPN JOA maintains its emphasis on compensation and offers an optional provision which allows a withdrawing party to seek indemnity from the breaching party for the amount of the withdrawing party’s investment under the concession and the joint operating agreement. However, this indemnity creates further problems in itself.

The problem with the AIPN JOA’s approach is that it could be used by a party to manipulate a compensated exit from the joint operating agreement and the concession. If that party can sustain an argument that it believes that its joint venture partner has breached its anti-corruption undertaking, then it could contrive an exit from a perhaps underperforming concession and require the allegedly breaching party to compensate it for its lost investment under both the concession and the joint operating agreement. In addition, there is no limitation (such as an exclusion for consequential losses) on the investment costs that the withdrawing party can recover from the breaching party.

There is no simple solution to this issue. The drafting committees of both the AIPN JOA and OGUK JOA have both grappled with the problem. But the potential unfairness of the optional provision available under the AIPN JOA does beg the question as to whether this remedy properly reflects the “proportionate procedures” approach encouraged under the Guidance. 

  • it will lose the value of its investment in the joint venture up to the date of the withdrawal;

  • it will remain liable for expenditures and commitments it approved prior to notifying its withdrawal; and

  • it will remain liable for its share of decommissioning liabilities.


The value of anti-corruption provisions in a contract is undoubted. They offer a valuable means by which a party can demonstrate compliance with its legal obligations under the Act, as just one element of a wider anti- corruption and compliance programme. In addition, they allow a commercial party to incorporate important contractual protections into its contracts with its counterparts. The exact nature of those contractual protections should be adapted to meet the commercial requirements of that party.

Although the standard form provisions prepared by organisations like the ICC, the AIPN and the OGUK offer a helpful starting point, there is no prescribed form of anti-corruption provision that must be adopted in a contract. Too often there is a temptation to follow a standard form provision slavishly – often because of a misplaced expectation that these provisions represent the ‘market’ position and therefore ensure a balanced commercial compromise for both parties. A party should feel free to negotiate and adapt these model form provisions as much as it would any other commercial provision of a contract in order to best meet its particular needs.

  1. Bribery Act 2010 Ch.23.

  2. http://www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidanc...

  3. http://www.iccwbo.org/advocacy-codes-and-rules/areas-of-work/corporate-r... clause/

  4. http://www.iccwbo.org/advocacy-codes-and-rules/document-centre/2011/icc-... on-combating-corruption/

  5. In certain jurisdictions the incorporation of terms by reference is not permitted. As such, Option II must be selected.

  6. http://www.transparency.org/bpi2011/results

  7. Article 20 of the AIPN Joint Operating Agreement, 2012.

  8.  “Amendments to Clause 22 of the OGUK Model Form Joint Operating Agreement to address the Bribery Act 2010, March 2013” - in the drafting notes to the Amendment the OGUK Operators’ Council Legal Committee notes that the drafting of the OGUK provision was informed by the anti-corruption provisions in the AIPN Joint Operating Agreement 2012. Notwithstanding this precedent the OGUK provision has adopted a distinctly different approach in a number of respects.

  9.  Article 20.1.G and Exhibit F of the AIPN JOA. These optional provisions were a new addition to the 2012 version of the AIPN model form joint operating agreement which was issued following the implementation of the Act.

  10. Section 1.8 of the AIPN 2012 Model Form Accounting Procedure. “While there is a need to ensure that corrupt practices do not bear fruit, there is also a need to maintain trust in the binding nature of the contractual undertakings (pacta sunt servanda), as it is a core component of successful business life. There must, therefore, be a balance between the efforts to fight corruption and the treatment of corruption as a breach of a Contract justifying its termination.” http:// www.iccwbo.org/advocacy-codes-and-rules/areas- of-work/corporate-responsibility-and-anti-corruption/ business-ethics-documents/icc-anti-corruption-clause/

Copyright © 2020, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume V, Number 71


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The energy industry by its nature is complex, and so are its legal matters. Businesses that explore, develop, produce, store, market, transport and process energy resources are among the most capital intensive in the world. Energy industry transactions – from business combinations to raising capital – are high stakes and high impact.

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