23.4.2.1 The corrupt gifts and fraud provision is aimed at all types of bribery, corruption and fraudulent acts perpetrated against the Authority, in connection with the procurement of the Contract and the ongoing contractual relationship.
23.4.2.2 As the Authority's ultimate sanction to terminate for such acts is severe, the recommended approach allows the Contractor the opportunity to avoid termination where the act has been carried out by a sub-contractor or employee acting on his own. Within a specified reasonable time period, the Contractor has to ensure that any relationship with the relevant party is terminated and, if applicable, a replacement procured for such party.
23.4.2.3 The following approach is the most appropriate way of dealing with the issue:
• if the relevant breach is committed by the Contractor or one of its employees and this is not the action of an employee acting independently (i.e. it is in some way "corporate corruption"), the Authority may terminate the Contract on payment of the Revised Senior Debt Termination Amount and can recover from the Contractor either any losses it suffers as a result of the breach or the amount of the value of the corrupt gift in question. If the breach is the result of the action of an employee acting independently, then the Contractor should terminate the person's employment and procure a replacement within [30] days of notice of the breach. If this is not done, then the Contract can be terminated on payment of the Revised Senior Debt Termination Amount and recovery of the Authority's losses;
• if the breach is committed by one of the Contractor's main Sub-Contractors (e.g. the Operating Sub-Contractor or Construction Sub-Contractor) or their employee and this is not the action of an employee acting independently (it is in some way "corporate corruption"), the Authority may terminate the Contract as above, unless the Contractor terminates the relevant main Sub-Contract and procures the performance of such service by another person within [30] days of notice of the breach. If the breach is the result of the action of an employee acting independently, then the Sub-Contractor should terminate that person's employment and procure a replacement within [30] days of notice of the breach. If this is not done, then the Contract can be terminated on payment of the Revised Senior Debt Termination Amount and recovery of the Authority's losses;
• if the breach is committed by any other party, the Authority may terminate as above unless within 30 days of notice of the breach the Contractor procures the termination of the employment of such person and of their employer (if not employed by the Contractor or its main Sub-Contractors) and the performance of such service by another person.
Required drafting is as follows:
23.4.2 Corrupt Gifts and Fraud
The Contractor warrants that in entering the Contract it has not committed any Prohibited Act.
23.4.3 Termination for Corrupt Gifts and Fraud
(a) If the Contractor or any Sub-Contractor (or anyone employed by or acting on behalf of any of them) or any of its or their agents or shareholders88 commits any Prohibited Act, then the Authority shall be entitled to act in accordance with paragraphs (b) to (g) below.
(b) Notwithstanding sub-clauses (c) to (f), if a Prohibited Act is committed by the Contractor or by an employee not acting independently of the Contractor,89then the Authority may terminate the Contract by giving notice to the Contractor provided that, if the Prohibited Act is an offence under section 7 (1) of the Bribery Act 2010, the Authority may not terminate the Contract unless, acting reasonably, it considers termination of the Contract to be in the best interests of the Project.
(c) If the Prohibited Act is committed by an employee of the Contractor acting independently of the Contractor, then the Authority may give notice to the Contractor of termination and the Contract will terminate, unless within [30] days of receipt of such notice the Contractor terminates the employee's employment and (if necessary) procures the performance of such part of the Works and/or Service by another person.90
(d) If the Prohibited Act is committed by a Sub-Contractor or by an employee of that Sub-Contractor not acting independently of that Sub-Contractor,91 then the Authority may give notice to the Contractor of termination and the Contract will terminate, unless within [30] days of receipt of such notice the Contractor terminates the relevant Project Document and procures the performance of such part of the Works and/ or Service by another person provided that, if the Prohibited Act is an offence under section 7 (1) of the Bribery Act 2010, the Authority may not terminate the Contract unless, acting reasonably, it considers termination of the Contract to be in the best interests of the Project. 92
(e) If the Prohibited Act is committed by an employee of a Sub-Contractor acting independently of that Sub-Contractor, then the Authority may give notice to the Contractor of termination and the Contract will terminate, unless within [30] days of receipt of such notice the Sub-Contractor terminates the employee's employment and (if necessary) procures the performance of such part of the Works and/or Service by another person.
(f) If the Prohibited Act is committed by any other person not specified in paragraphs (b) to (e) above, then the Authority may give notice to the Contractor of termination and the Contract will terminate unless within [30 days] of receipt of such notice, the Contractor procures the termination of such person's employment and of the appointment of their employer (where not employed by the Contractor or the Sub-Contractors) and (if necessary) procures the performance of such part of the Works and/or Service by another person provided that, if the Prohibited Act is an offence under section 7 (1) of the Bribery Act 2010, the Authority may not terminate the Contract unless, acting reasonably, it considers termination of the Contract to be in the best interests of the Project.
(g) any notice of termination under this Clause shall specify:
(i) the nature of the Prohibited Act;
(ii) the identity of the party whom the Authority believes has committed the Prohibited Act;
(iii) the date on which the Contract will terminate, in accordance with the applicable provision of this Clause;93 and
(iv) the Authority's chosen option under Clause 23.4.3 (Compensation on Termination for Corrupt Gifts and Fraud).
(h) The Contractor undertakes to the Authority that it will throughout the duration of this Contract use all reasonable endeavours to have in place adequate procedures (as referred to in Section 7(2) of the Bribery Act 2010 designed to prevent persons associated with the Contractor from bribing any person with the intention of obtaining or retaining business for the Contractor or with the intention of obtaining or retaining an advantage in the conduct of business for the Contractor.
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88 The extension of this concept to shareholders of the Contractor or any Sub-Contractor should be reviewed if the shares of any such companies are listed on a stock exchange, albeit in the light of the restricted nature of a "Prohibited Act".
89 This means the employee acts under the authority of or with the knowledge of a director of the Contractor (rather than a majority board decision).
90 Depending on the Project, there may be provisions regarding the approval of replacement Sub-Contractors, employees and other sub-contractors which will need to be satisfied.
91 This means the employee acts under the authority of or with the knowledge of a director of the Sub-Contractor (rather than a majority board decision).
92 This must comply with the provisions of replacement Sub-Contractors - see Section 7 (Services and Service Commencement).
93 Either immediately or following the 30 day period specified.