Singapore Bribery Case Reveals Corruption Risks in Shipping Industry

Singapore Bribery Case Reveals Corruption Risks in Shipping Industry

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May 08, 2015

Last week’s decision by the Chief Justice of Singapore’s Supreme Court entitled Public Prosecutor v Syed Mostofa Romel is important for shipping companies operating in Singapore. The decision regards bribery charges against a local vessel surveyor who on three occasions solicited bribes from ship masters for issuing favorable inspection reports that would allow the ships to enter an oil terminal. Chief Justice Sundaresh Menon disagreed with a district judge that had sentenced the respondent, Syed Mostofa Romel, to a two-month imprisonment and instead argued that given the circumstances the jail time should be extended to at least six months per charge, (at least 12 months). Chief Justice Menon’s explanation may be used in future maritime-related bribery cases in Singapore.

Singapore’s 1960 Prevention of Corruption Act (PCA) applies to both the supply and demand side of a bribery transaction including agents, and is punishable by a fine of up to SGD$100,000 or imprisonment up to five years, or both. The PCA does not contain any exceptions for “customary” payments, including facilitation payments. Any person who is suspected of bribery can be arrested and searched without a warrant by the Corrupt Practices Investigation Bureau (CPIB). The CPIB can also investigate any bank account or safe deposit box belonging to a suspect of a bribery offence. Given the growing international cooperation in bribery investigations, it is plausible to assume that non-Singapore citizens or residents could be implicated in national investigations with the information being subsequently shared with other national authorities.

The decision contains four main takeaway lessons for those operating in the shipping industry. First, punishment for private sector bribery is just as harsh as that for public sector bribery. Chief Justice Menon argues against the presumption of predominantly non-jail sentences in cases of private sector corruption and refers to the PCA’s enforcement practice, according to which the public interest and the gravity of the offence, among other considerations, determine the sentencing decisions. Chief Justice Menon points out that even though the PCA largely focuses on private sector bribery, it also applies to bribery by “private agents, trustees and others in a fiduciary capacity.” In this particular case the vessel surveyor was a private sector agent without any regulatory and oversight functions that could justify the application of a “public service rationale.” Regardless of whether bribery is related to a private or public sector, the severity of the offence due to its potential threat to safety of people and facilities should justify a longer prison term for the offender, argues the chief justice.

Second, bribery in port can cause severe safety risks. In the case at hand, the vessel surveyor was supposed to have ensured that the vessels had no high-risk defects before entering the oil terminal. If such defects were identified during the inspection, the vessels would have undergone rectifications before being permitted to enter the terminal. On two occasions, the surveyor exaggerated his findings by indicating some non-existing high-risk defects to elicit bribes--US$3,000 in each incident--from the ship masters in exchange for the accurate inspection reports he should have produced. On a third occasion, which was in reality a sting operation organized by the CPIB, the surveyor attempted to elicit a bribe from a ship master in exchange for a report that would not mention the high-risk defects that the inspection identified. (Those defects were intentionally created for the purposes of the sting operation.) Chief Justice Menon argues that a bribery incident that allows a vessel with high-risk defects to enter an oil terminal poses a grave threat to both people working in the terminal and the terminal itself, and therefore should be regarded as an aggravating factor in considering the type and degree of punishment.

Third, acquiescence to extortion demands are also considered bribes. Even though there is no information available as to whether either or both ship masters were accused of bribery, the main international anti-bribery laws prohibit giving a bribe, unless there is imminent threat of physical harm. In this particular case, it appears that no threat of death or serious bodily injury was present, and therefore both ship masters could safely walk away without making a payment. As the U.S. Congress noted when it enacted the 1977 U.S. Foreign Corrupt Practices Act, the fact that the payment was “first proposed by the recipient… does not alter the corrupt purpose of the part of the person paying the bribe.”

Finally, bribery in the maritime industry as a whole—not just in ports – may be regarded as an aggravating factor in sentencing considerations. Chief Justice Menon maintains in his opinion that the maritime industry is a strategic industry in Singapore that accounts for up to 7% of GDP and provides employment to 170,000 people. Since the ramifications of increased corruption perceptions in Singapore’s shipping industry could have significant detrimental effect on the nation’s economy, one can expect that any bribery incidents involving shipping will be strictly punished, including through longer prison terms for offenders.

This Singapore bribery case, along with other recent legislative, enforcement, and collective action initiatives in the shipping industry worldwide, strongly suggests that anti-bribery compliance is gaining ground. The most challenging perhaps would be to change long-established attitudes towards bribery in the industry that “things are just done that way.” No longer.

 

 

Compendium Roundup: May 2015
Compendium Roundup: April 2015
Justina Song Singapore Bribery Case Reveals Corruption Risks in Shipping Industry

Comments 8

  1. Richard Palmer

    Shipping is a huge industry and it's mostly covered by the government so it's no surprise to me that there are actually bribes happening behind our back - we just have to fight it!

  2. Kat

    Bribery really exist nowadays. A lot of persons in authority are exercising such thing. There should be a firm law to eradicate this improper act.

  3. Richard Palmer

    Shipping is a huge industry and it's mostly covered by the government so it's no surprise to me that there are actually bribes happening behind our back - we just have to fight it!

  4. Kat

    Bribery really exist nowadays. A lot of persons in authority are exercising such thing. There should be a firm law to eradicate this improper act.

  5. Richard Palmer

    Shipping is a huge industry and it's mostly covered by the government so it's no surprise to me that there are actually bribes happening behind our back - we just have to fight it!

  6. Kat

    Bribery really exist nowadays. A lot of persons in authority are exercising such thing. There should be a firm law to eradicate this improper act.

  7. Richard Palmer

    Shipping is a huge industry and it's mostly covered by the government so it's no surprise to me that there are actually bribes happening behind our back - we just have to fight it!

  8. Kat

    Bribery really exist nowadays. A lot of persons in authority are exercising such thing. There should be a firm law to eradicate this improper act.

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