From Tradewinds, 2012.05.04, page 2. Worth more than just a reading… The bolds in the text are mine: there are only three of them.
The “chatterati” of the London shipbroker network have worked themselves into a frenzy in recent weeks gossiping over allegations that have emerged in public about bribery in the tanker-chartering business.
For brokers whose lifeblood is trade in speculation, it has added a frisson of excitement to otherwise largely gloomy markets news of late. If they stepped back a little, however, they might see their interest in such issues highlights a fundamental shift in the issues the industry faces, away from the old arguments about ship safety and pollution and onto new, more complex challenges.
It is perhaps an example of the increasing scrutiny shipping faces over business practices that until very recently have been accepted by many as standard and fair industry practice but which are now being questioned by lawmakers worldwide.
For example, the UK Bribery Act last July outlawed facilitation or “grease” payments in contracts anywhere globally involving firms with a UK presence of any type. It also outlawed “lavish” corporate entertainment but so far corporate tickets to Wimbledon and Ascot are selling just fine, while shipping folk still clearly enjoy being entertained.
More broadly, financial regulators worldwide have been forced by public outrage to tighten up on illicit practices that did so much to cause the 2008 crash and subsequent recession. Among many ways in which shipping markets have been affected is the scaling back by investment banks of proprietary trading of forward-freight agreements (FFAs).
Barry Vitou, the partner who leads London law firm Pinsent Masons’ corporate crime team, sees the UK Bribery Act as the “poster child” for regulatory action in the face of the public’s increasing anger over unethical business practices. But while the act has teeth, the authorities have not yet used them.
“Many firms have tried to address these risks but it is incumbent on the government to recognise those who have done the right thing, and not just do nothing,” he said. “That would risk allowing lawbreakers to benefit from those who have addressed the issue.
“After all the tough talk the authorities must be seen to act. If no action is taken the authorities risk being seen as the ‘boy who cried wolf’.”
Shipping is clearly at high risk, as there is an obvious challenge in the form of demand for “facilitation” payments, which have been almost commonplace in some ports in some regions.
The UK’s Serious Fraud Office (SFO) has laid out a methodology to deal with such “grease” payment culture. “The question is: how many shipping companies are addressing the issue using the guidance and how many have buried their heads in the sand?” asked Vitou. “The latter approach comes with significant risk under the Bribery Act and the US Foreign Corrupt Practices Act [FCPA].”
The arrival this week of David Green as new head of the SFO could mark a watershed. He has vowed to not shy away from prosecuting firms even in significant cases, reversing his predecessor’s style of doing “deals” with wrongdoers rather than pursuing them through the courts.
In the global political arena, US sanctions against Iran have already hit high-profile shipowners and brokers, while the effect of the European Union (EU)’s own looming oil-sanctions regime against Iran is starting to bite into how the crude and products charter markets function.
Scott Bergeron, chief executive of the Liberian register, told last week’s Plymouth Nautical Degree Association conference at IMO: “If you haven’t already, you’re going to hear a lot more about sanctions. The landscape is changing very quickly, there’s a freight train approaching.”
David Brummond, senior sanctions advisor on shipping for the US Treasury’s Office for Foreign Assets Control (Ofac), told the same event: “We know we have to work with this industry but make no mistake, we intend to enforce our laws.” Many believe the public will not be forgiving of businesses that appear to be flouting such regulations.
“Unintended consequences” of such sanctions remain a serious risk, counters sanctions expert Mike Salthouse of the North of England P&I Club, with “accidental” sanctions breakers at risk of being targeted.
Shipping has always dealt in power, some notorious corruption at times and its own fair share of lies.
That phrase “Power, corruption and lies” for some of a certain generation —and I should declare that I am one — does evocate only one thing: seminal Manchester band New Order’s second album of the same name.
To those in shipping, however, those three words are going to ring in their ears for even more crucial questions of business probity in the coming months and years. In shipping, “power” is obvious to all who look; petty “corruption” is nowadays rare and largely hidden even when it exists; and as for the “lies”, there are many more out there than most would like to admit.
By Julian Bray’s Wavelength