Even if a participant company does not hold a controlling interest in and cannot control the operations of a joint venture, it still can be held criminally liable (assuming jurisdictional requirements are met) if it either:

Participation in or awareness of bribery can be imputed to a company with a minority, non-controlling interest through any officer, director, employee or third party acting on the company's behalf (for example, an agent, consultant or advisor) under an agency theory of criminal liability or the principle of respondeat superior, a common law doctrine that makes an employer liable for the actions of an employee that occur within the scope of his or her employment.

If an individual representing a company as a joint venture board member or on the joint venture operating committee directed or authorised the bribery or had reason to know that bribery was about to occur and failed to make efforts to stop it, the employing company can be held liable in some circumstances for the bribery (see, for example, section 7, UK Bribery Act). The risk of liability would increase if the employee, officer or director maintained his or her position within the participant company and continued to report to higher ranking persons at the participant company while serving on the joint venture board or operating committee.

A recent example of an enforcement action based on direct participation and knowledge is the prosecution by the US Department of Justice (DoJ) and US Securities and Exchange Commission (SEC) of the four members of the TSKJ joint venture consortium in Nigeria: Technip, Snamprogetti, M W Kellogg and JGC. None of the TSKJ joint venture participants had a majority stake in the joint venture. The DoJ and SEC nevertheless imputed culpable knowledge to each because senior executives from each company, including some who were serving on the TSKJ Steering Committee, participated in meetings in which the bribery of Nigerian government officials was discussed and the executives authorised improper payments to secure contracts for the joint venture.

Not all cases of imputed liability involve such a clear example of knowledge of the bribery scheme. Under the FCPA, liability can be triggered by:

Consequently, if an employee, officer, director or agent has reason to know or suspect that a joint venture in which his or her company is participating is engaged in or is about to engage in bribery-related misconduct but the company does not make a good effort to stop the bribery and fails thereafter to withdraw from the joint venture, the company will be at risk of direct prosecution.

A company that holds a minority interest in a joint venture also risks criminal liability for bribery by or on behalf of the joint venture if the company has the potential to exercise significant control over the joint venture. That risk exists even if the company did not actually exercise control and its officers, directors, employees or other third-party representatives did not participate in or know about the bribery.

To determine whether a company had the potential to control the joint venture and prevent bribery from occurring, enforcement authorities consider a variety of factors, including:

The more the foregoing factors apply to a minority partner, the more compelling a case enforcement authorities would have to regard the partner as possessing more potential control than would be suggested by the size of its ownership interest in the joint venture.

Simply restricting the company's ownership interests or voting power, or avoiding control over the joint venture's compliance programme, may not be sufficient to avoid liability given the numerous factors relevant to assessing liability. Such restrictive actions, depending on the circumstances, could be considered an attempt at "wilful blindness" and therefore would offer no defence.

In addition to the potential liability that a company participating in a joint venture can face, officers, directors or employees of minority interest, non-controlling joint venture participants who are seconded to the joint venture or who serve on the joint venture's board or in senior positions can face individual liability for bribery by or on behalf of the joint venture.

The largest risk of prosecution generally arises if the director, officer or employee is found to have approved the bribery. However, like the company participant, directors, officers and employees are also at risk of prosecution if they had reason to know that bribery was occurring or was about to occur by or on behalf of the joint venture but did nothing to stop it. Ignoring obvious warning flags for on-going or imminent bribery tends to be viewed by anti-bribery enforcement officials in the US, UK and many other countries as being sufficient for an individual prosecution.

A US issuer that owns a minority stake in a joint venture also can face liability under the FCPA's books and records and financial control provisions regardless of whether it is liable for the underlying bribery. Liability for violating the books and records or financial control provisions of the FCPA is likely to arise in three circumstances.

First, the issuer that holds a minority interest could be directly liable for a violation of the accounting provisions if it consolidates or otherwise incorporates into its accounts irregularities contained in the joint venture's accounts.

Second, a US issuer that owns a minority stake could be held strictly liable for the joint venture's violation of the FCPA's accounting provisions if the issuer had the potential to exercise control over the joint venture. US authorities have made clear that because "an issuer's books and records include those of its consolidated subsidiaries and affiliates," "[a]n issuer's responsibility...extends to ensuring that subsidiaries or affiliates under its control, including foreign subsidiaries and joint ventures, comply with the [FCPA] accounting provisions." See Criminal Division of the US Department of Justice and the Enforcement Division of the US Securities and Exchange Commission, A Resource Guide to the U.S. Foreign Corrupt Practices Act 43 (November 14, 2012) (emphasis added). A minority stake-holder typically can avoid liability if it has made "good faith efforts" to "use its influence, to the extent reasonable under the issuer's circumstances", to cause the joint venture to implement controls designed to ensure compliance with the accounting provisions. 15 U.S.C. § 78m(b)(6). This "good faith" exception is not likely to apply, however, to an issuer that has "operational control" over a minority-owned joint venture. For example, in BellSouth Corp., Securities Exchange Act of 1934, Release No. 45279 (2002), BellSouth was held strictly liable for its minority-owned subsidiary's violations of the accounting provisions because "through its operational control, [BellSouth] had the ability to cause [its subsidiary] to comply with the FCPA's books and records and internal controls provisions." Ibid. A similar analysis could be applied to the joint venture context using the control factors discussed above.

Third, a company that owns a minority stake in a joint venture and has no potential to exercise control still may be liable if it fails to make "good faith efforts" to "use its influence, to the extent reasonable under the...circumstances" to cause the joint venture to implement controls designed to ensure compliance with the accounting provisions. 15 U.S.C. § 78m(b)(6). The "good faith efforts" that the FCPA requires will vary but will tend to include steps such as:

Even if a minority owner can avoid liability under the bribery, books and records and financial control provisions of the FCPA and other similar laws, it can face liability under anti-money laundering statutes if it receives proceeds of the underlying bribery. The anti-money laundering statutes impose criminal liability and can result in confiscation of the tainted proceeds.

A violation of applicable anti-money laundering laws can be deemed to have occurred if:

The 2011 settlement by the UK Serious Fraud Office (SFO) with M W Kellogg Limited (MWKL) demonstrates how anti-money laundering statutes can be used as an enforcement tool in bribery cases. MWKL entered into a settlement with the SFO and agreed to pay GB£7 million as a civil recovery under the UK Proceeds of Crime Act 2002. The underlying conduct involved the TSKJ bribery scheme discussed above.

MWKL's US parent company was involved in the joint venture scheme but MWKL took no part in the corrupt activity. MWKL entered into a settlement because its share dividends were payable from profits and revenues generated by contracts obtained by the joint venture's corrupt payments. A similar strategy could be used under US anti-money laundering laws as well as the anti-money laundering statutes of many other countries.

The potential for civil and criminal liability for bribery by or on behalf of a joint venture is not the only risk faced by minority shareholders. Even if only the joint venture itself is prosecuted for bribery, books and records or financial control violations or money laundering, participants in the joint venture, including minority participants, can face significant financial losses and other collateral consequences, such as the following:

Liability and collateral consequences for a minority joint venture participant can extend to bribery that occurred even before the joint venture was formed. If a joint venture partner has bribed government officials to obtain something of value that is contributed to and exploited by the joint venture, such as a mining licence, other joint venture partners, including minority shareholders, can face a risk of direct liability (at least under the FCPA) if they fail to take steps to ensure that the tainted asset is excluded or removed from the joint venture.

Tainted joint venture assets also can be subject to forfeiture under anti-money laundering laws. Depending upon how essential the asset is to the joint venture, if the asset is confiscated, the joint-venture's value can suffer a significant loss, affecting both majority and minority owners. In addition, even in the absence of confiscation, a minority partner can suffer reputational damage simply by being associated with a partner with "dirty hands."

The ongoing investigations of the mining company BSG Resources (BSGR) illustrates the risks associated with tainted assets and underscores the need to conduct due diligence not only on joint venture partners but also on any assets that partners are proposing to contribute to the joint venture.

BSGR faces investigations in multiple countries over allegations that it bribed Guinean officials to win a mining concession in Guinea. Because of the allegations, work to develop the mine was stalled, and, if the allegations are proved, BSGR may lose its concession. This work stoppage and potential concession loss will affect not only BSGR but also BSGR's joint venture partner. See for example, Ian Cobain, Swiss and French Police Raid Offices Linked to Billionaire Steinmetz, The Guardian (29 August 2013); Jesse Riseborough and Thomas Biesheuvel, Steinmetz-Linked Probe Seen Spurring Race for $50 Billion Mine, Bloomberg Businessweek (6 May 2013); David Rhode and Clara Fereira-Marques, Corruption Probe Raises Questions over Guinea Mine' s Future, Reuters (19 April 2013).

Although compliance resources are often scarce, companies that intend to participate in a minority-owned or non-controlled joint venture should devote at least some compliance resources to identifying and guarding against the potential bribery-related risks discussed above. That is not to say that minority and majority-owned joint ventures must be treated as if they pose an equal risk or that all minority-owned joint ventures must receive the same attention.

To determine what compliance resources to devote to a particular joint venture, companies should assess the risk profile of the joint venture. The risk assessment should take into account:

Companies should conduct careful due diligence before agreeing to participate even as a minority shareholder in a joint venture. The due diligence should focus on the potential joint venture partners as well as any assets that the potential partners are proposing to contribute to the joint venture.

If it is not possible to conduct due diligence before the joint venture is formed or an investment in the joint venture is made, a company entering the joint venture should structure the governing documents to allow it to conduct due diligence on a post-hoc basis and remedy any bribery-related concerns that it identifies.

The nature and scope of the due diligence should take into account a variety of factors, including:

If any bribery-related warning signs are discovered during the due diligence process or at a later date, the minority or non-controlling owner must ensure its bribery concerns are addressed and proper remedial steps are taken. For example, if an asset proposed to be contributed to the joint venture is believed to have been acquired through bribery, the company should seek to exclude that asset from the joint venture. Of course, if the asset acquired through bribery is essential to the joint venture, companies would be well-advised simply to walk away from the deal.

What remedial action is appropriate will depend upon the nature of the warning signs. Warning signs do not necessarily require termination of a relationship, but they do point to areas that warrant heightened scrutiny. Companies should document any steps that are taken to resolve warning flags identified during the due diligence process or at any point in the operation of the joint venture. This documentation will be useful in establishing the company's "good faith efforts" to prevent bribery in the event enforcement authorities in one or more countries open an investigation.

As part of its "good faith efforts," a company having a minority, non-controlling interest in a joint venture should seek to include bribery-related risk management provisions in the joint venture agreement. Although the provisions should be tailored to the perceived risk level, the following provisions are recommended:

The inclusion of the foregoing provisions will help put joint venture partners on notice that bribery will not be tolerated and help document the relationship and understanding between the partners in the event of a future enforcement action.

Simply including these provisions in the joint venture agreement, however, is not sufficient to mitigate liability risks. The failure to exercise contractual rights when they exist, for example, failing to audit or actually to require the joint venture to adopt appropriate financial controls, can be evidence of complicity in the eyes of enforcement authorities. Companies therefore should be realistic about the provisions they include in the joint venture agreement.

Due to the potential for company and individual liability discussed above, minority joint venture participants should take reasonable steps to ensure that the joint venture is operating and will continue to operate in compliance with the applicable anti-bribery laws before accepting and giving an important occupational rule in the joint venture to a director, officer or employee of the participant.

Minority joint venture participants also should provide their directors, officers or employees who are or will be seconded to the joint venture with a careful briefing about what they must and must not personally do if they believe that bribery is occurring or is about to occur by or on behalf of the joint venture.