Ethical Dilemmas of Bribery in Shipping

Ethical Dilemmas of Bribery in Shipping

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October 29, 2015

Anti-bribery laws seem to be particularly hard to implement in the shipping industry. One reason for this is the entrenched, long-held perception that bribing is “normal” in the industry. Furthermore, many situations that take place frequently in the industry may not be covered by existing anti-bribery laws and turn into ethical dilemmas for ship masters, ship operators, and managers.

Let’s look at the example of an often reported, low-grade extortion in private ports – that occurs when a ship master feels forced to pay a small bribe (frequently characterized as a “tip”) to a port official to enter the port without facing any artificial obstacles that may delay the entrance. And let’s assume that there is a perishable good on board that needs to be unloaded urgently and properly handled. The shipping company’s Code of Conduct prohibits bribery and facilitation payments to both government officials and private citizens.

In regard to the legality of these actions, port officials in privately-owned ports are not government officials; therefore, bribing them would not evoke the FCPA, which does not address bribery of private citizens (this could be actionable under other U.S. statutes, however). Arguably, this scenario also may not fall under the UK Bribery Act, even though it prohibits commercial bribery along with public bribery. However, Section 1 of the UK Bribery Act prohibits offering an advantage to anyone with the intent of inducing that person to improperly perform a relevant function. In our example, a ship master is paying to induce the person to properly perform a relevant function. In addition, not all local laws prohibit commercial bribery. Thus, the example is well-suited for being approached as an ethical dilemma.

To respond to an ethical dilemma, the Institute for Global Ethics suggests first categorizing the dilemma and then applying so-called “resolution rules” to address it. There are three categories for ethical dilemmas that suit business relationships: 1) truth vs. loyalty; 2) short term vs. long term; and 3) individual vs. community. In our example, a ship master can pay a small bribe in violation of the company’s Code of Ethics, but preserve the cargo and thereby maintain loyalty to a powerful cargo owner (of course, it may also benefit a local community dependent on the cargo being delivered). By paying a bribe, a ship master can satisfy the short term goal of delivering a perishable good intact, while in the long term putting his company at risk of future enforcement actions and escalating bribery demands. By deciding to pay a bribe, a ship master can also benefit individually by gaining credit for delivering a good despite the obstacles. Yet, the decision puts a local community at a disadvantage by reinforcing a corrupt culture through yet another tainted transaction, and may result in the community having to pay higher prices for the good if the seller passes along the cost of the bribe.

In order to decide on the best course of action, a ship master should then apply the aforementioned resolution rules, which are 1) end-based, i.e. always choose the option that benefits the most, 2) rules-based, i.e. follow tenets of universal law, and 3) care-based, i.e. choose a value that is mutually agreeable. Applying these resolution rules to our example, it is quite obvious that the decision to pay a bribe would not benefit the greatest number of people (except if the good is an important medical product needed to treat an epidemic, for example); would be in violation of the universal principle of being truthful and not stealing (in this case, diverting funds from the company meant for legitimate business expenditures to pay the bribe); and would cause harm by reinforcing the culture of corruption and encouraging future abuses by corrupt officials.

Of course, our example may have many variations that would make the decision of whether to pay a small bribe very challenging from an ethical standpoint. However, this framework for dealing with ethical dilemmas can help companies handle such situations with greater awareness of both legal and ethical considerations for themselves, the industry, and local communities.

For more on this topic, please see the following resources:

Victims of Bribery: Perspectives from the London International Shipping Week 2015
The High Cost of Small Bribes
“Tipping” Risks in Shipping

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What CFOs Need to Know about Ethics and Compliance: Lessons from the 45th IAFEI World Congress
Malaysia: Prime Minister Battles Corruption Allegations – Part II
Justina Song Ethical Dilemmas of Bribery in Shipping

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