Multilateral Development Banks And Integrity: Know The Rules Of The Road

• Published date: 02 March 2021
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Criminal Law, Compliance, Corporate and Company Law, Government Contracts, Procurement & PPP, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Mayer Brown
• Author: Mr Sam Eastwood and Paul Whitfield-Jones

Towards the end of 2020, the World Bank Group (WBG) debarred Berky GmbH, a German engineering company, and Aktor Technical Société Anonyme, a Greek construction company, in unrelated cases concerning their conduct in bids for projects in (respectively) Myanmar and Colombia. These cases provide a valuable reminder to companies bidding for projects financed by multilateral development banks (MDBs) about the integrity compliance risks associated with them:

• Debarment by an MDB can have a severe impact on a company that can extend beyond just the projects financed by that MDB. Debarment by one MDB can incur "cross-debarment" by other MDBs, as has happened in the case of Berky and Aktor, and reputational loss more generally. In 2020, the WBG debarred 267 firms and individuals globally.
• Companies participating in MDB-financed projects should be aware of these potential penalties and take steps to assess the integrity compliance risks that such projects present. The cases of Berky and Aktor highlight the range of risks that can arise and, by extension, the importance of an effective integrity compliance programme that aligns with MDB Integrity Compliance Guidelines ("ICP") - which Berky and Aktor are now required to do as a condition for being released from debarment.
• In particular, the Berky case points to the many and varied risks associated with third party intermediaries, which should be a point of focus in the design of any ICP where intermediaries are in play. The Aktor case demonstrates that what MDBs regard as sanctionable conduct (corruption, fraud, collusion, coercion and obstruction) can even include conduct that is legal for a company in its home jurisdiction.

Berky

In November 2020, the WBG debarred Berky, which specialises in water maintenance machines, for two years and six months for its conduct in relation to the Ayeyarwady Integrated River Basin Management Project in Myanmar. According to the WBG¹, Berky allegedly engaged in a range of sanctionable conduct, including:

• entering an arrangement to submit a second bid for the project using its subsidiary's brand name (collusion);
• failing to disclose commission paid to a local Myanmar agent in its initial bid and on a later amendment to the contract (fraud); and
• arranging a trip to Europe for three officials from the project management unit to improperly influence their acceptance of Berky's equipment (corruption).

The debarment extends to five affiliate entities of Berky. The severity of the...