A huge cost leap has surfaced in the past 5-10 years for a number of jurisdictions as companies scramble to keep up with strengthening competition laws around the region, according to Baker & McKenzie special counsel Martin Commons.
Commons who spoke as part of a panel of anti-corruption and competition law specialists for the firm’s annual Asia Pacific Meeting held in Singapore last month, said penalties in the area of bribery and corruption are also on the upswing, with violators from Taiwan, Japan and Korea – amongst others – already serving jail time sentences for price fixing and bid rigging.
In addition, Hong Kong has just proposed in a new competition bill – which is currently reviewed by Hong Kong’s legislative council committee – to fine companies up to 10% of violating entities’ group worldwide revenues – not as a single figure but as a multiple of the number of years the company have broken the law. "If this passes, Hong Kong's penalties will far surpass what the EU could fine you for non-compliance," Commons said.The proposed law is set to be passed in parliament next year and to come into effect between 2013 and 2014.
“Indonesia proposes fines at a slightly different scale but then the trends are the same,” Commons said. “The authorities, the KPPU are getting creative on exacting maximum damage on the companies they pursue,” he said.
According to the panel, Korea leads the region in terms of fines. In 2009, fines in Korea registered between over US$300m.
“With the increased level of investment within the region, and the establishment of the ASEAN community by 2015, there is a pressing need for business to establish strategies that facilitate compliance, growth and progress,” the firm’s Asia-Pacific regional chairman Jeremy Pitts spoke from Singapore.
Currently some 150 companies conducting business overseas face harsh financial sanctions for violating the US Foreign Corrupt Practices Act. This number is expected to grow as the US and European foreign direct investments increases, and the “zero tolerance” UK Bribery Act comes into force later this year.
The top 10 ‘costs of compliance’ table of the largest offenders at the start of 2011 witnessed fines – some 10 times the size – of fines issued at the same time last year.
The panel estimates that Asia will catch up with its western counterparts – who presently dominate the table of non-compliance costs – within the next 10 years. “
Baker & Mckenzie Singapore partner Kiat Seng Lee believes the greatest threat to this part of the world is the use of third parties in other jurisdictions without proper due diligence done on these third parties.
More than 300 of the firm's partners and more than 450 of the firm's regional and global clients attended the meeting to discuss how businesses need to be increasingly conscious of meeting local and international compliance obligations.ALB
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