US investigation into BHP Billiton concluded

• $25 million civil penalty imposed

• No findings of corrupt intent or bribery

• Remedial efforts to enhance compliance program and full cooperation by the company acknowledged

After a lengthy investigation by the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) relating to potential breaches of anti-corruption laws which began in 2009, global resources company BHP Billiton announced this week that the matter had been resolved.

The investigation by the US regulators primarily related to the company’s minerals exploration and development efforts and its hospitality program in connection with its sponsorship of the 2008 Beijing Olympic Games.  BHP Billiton cooperated fully with the SEC and DOJ since the investigation began and has since developed a world class anti-corruption compliance program.

The SEC imposed a civil penalty of US$25 million (which is relatively low in comparison to the penalties imposed in the top 10 enforcement actions for breaches of US anti-corruption laws ranging from US$185 million to US$800 million).  Interestingly, the SEC made no findings of corrupt intent or bribery by BHP Billiton.  The DOJ completed its criminal investigation without taking any action.

The SEC noted that the settlement ‘reflects BHP Billiton’s remedial efforts and cooperation with the SEC’s investigation’.  The company is required to report to the SEC on the operation of its compliance program for a 12 month period.

The SEC found that BHP Billiton failed to devise and maintain sufficient internal controls over its hospitality program in connection with its sponsorship of the Beijing Olympics, where the company invited 176 government officials and employees of state-owned enterprises to attend the Games.  Sponsored guests mainly from Africa and Asia were provided with hospitality packages that included event tickets, luxury hotel accommodation, and tours.

The SEC stated in its cease-and-desist order released earlier this week that, ‘as a result of its failure to design and maintain sufficient internal controls over the Olympic global hospitality program, BHP Billiton invited a number of government officials who were involved with, or in a position to influence, pending negotiations, efforts by BHP Billiton to obtain access rights, or other pending matters’.
The company stated publically that while it made efforts at the time to address the risks relating to inviting government officials to the Olympics, the controls it relied on were insufficient to satisfy the internal accounting controls requirements of the US anti-corruption laws.

Mining and resources companies, particularly those operating in high risk countries, should ensure that they have adequate procedures in place to manage the corruption risk associated with giving gifts, meals and entertainment to government officials, especially where the official is in position to influence pending negotiations or decisions regarding the grant of mining and petroleum licences. 

If anything of value is given or offered to government officials, it should be appropriate in the circumstances, having regard to whether any other things of value have been given to the government official in the previous six months, whether it is of an appropriate value and nature considering the government official’s position and whether it serves only a legitimate business purpose.

Since the commencement of the US investigation, BHP Billiton has undertaken the following significant remedial action, which was important in demonstrating its strong culture of compliance and its commitment to operating to the highest standards:

• creating an independent compliance function that reports to the head of the legal function and the Risk and Audit Committee of the board
• enhancing its policies and procedures regarding hospitality, gift giving, use of third party agents and business partners and other high-risk areas
• enhancing its financial and auditing controls
• conducting extensive employee training globally on anti-corruption issues, and
• overhauling its processes for conducting internal investigations of potential violations of anti-corruption laws.

Tiffany McLean

Risk based approach to compliance and enforcement - NSW Division of Resources and Energy

The NSW Division of Resources & Energy (DRE) has published its new Compliance and Enforcement Policy which introduces a risk-based approach.  

The DRE will determine its enforcement approach by identifying the likelihood of a particular event occurring and the consequence to the community, industry and DRE should that event occur. 

The DRE’s Compliance & Enforcement branch (established on 31 July 2014) oversees and investigates non-compliances with obligations created by the grant of a right to explore, extract or produce petroleum or minerals in NSW, as well as unlawful mining or petroleum extraction activities.  Its functions include:

• monitoring overall industry compliance
• developing compliance initiatives and programs, and
• determining the level of enforcement to be applied in cases of non-compliance.

The risk-based approach to compliance and enforcement means that businesses who have not complied with relevant polices, regulations, approval or licence conditions are deemed ‘high risk’, while business that do comply are determined to be ‘low-risk’.

The DRE’s stated regulatory objectives are:

• to maximise a titleholder's compliance with legislation and policies governing coal, mineral, petroleum and coal seam gas activities
• to provide for a healthy and safe work environment for mineworkers resulting in zero deaths and a reduction in serious injuries occurring in the workplace
• to promote a culture of environmental protection and best practice environmental management in the exploration, mining and petroleum industries
• to educate and provide guidance to industry and the community
• to demonstrate consistency in the compliance and enforcement actions taken by DRE
• to promote transparency in DRE's decision making processes
• to conduct thorough and timely investigations of potential non-compliances or alleged breaches of legislation, policies or approvals
• to exercise enforcement action in a professional, transparent and effective manner
• to encourage self regulation and timely reporting of non-conformances to Government, and
• to protect the interests of the State and the people of NSW.

The DRE has identified that it will focus its regulatory actions on ‘those who consciously choose not to comply with the law’, and will be undertaken in order to raise industry awareness and to encourage a change in attitude or behaviour.  The 2015-2016 compliance priorities will be:

• titleholders, prospectors or mine operators whose activities potentially have significant safety implications
• titleholders, prospectors or mine operators whose activities actually or potentially have a significant impact upon the environment, community or government revenue
• titleholders, prospectors or mine operators whose activities whose activities attract significant public interest
• titleholders, prospectors or mine operators whose activities who have a history of non-compliance with title conditions, and
• titleholders, prospectors or mine operators who are not undertaking effective exploration.

The DRE’s auditing program will include compliance inspections and assessments, desktop audits, targeted audits and comprehensive audits, which will review information about business operations through onsite investigation and intelligence gathering.

 

Enforcement actions can include financial penalties, permit penalties (imposition of restrictive conditions) and suspension or cancellation of licences, permits and authorities. 

 

Explorers and miners in NSW should be aware of the new Compliance and Enforcement Policy being implemented by DRE and should ensure that they comply with the conditions of any mining or petroleum tenement. Additionally, if your activities attract significant public interest you may get extra attention from DRE notwithstanding a strong environmental record. We can assist you with understanding your obligations under your tenement conditions.

 

Samantha Daly, Patrick Holland, Kate Swain, Felicity Douglas 

Planning Minister announces review of Mining SEPP

The New South Wales Planning Minister Rob Stokes recently announced an upcoming review of the State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (Mining SEPP) which will occur before September 2015. 

In making this announcement the Minister indicated that:

• there will be an overhaul of the way large mining and coal seam gas projects secure approval
• environmental considerations must be a foundational concern in any decision about resource use
• the community will be given a greater chance to test the planning decisions
• society and the environment will get a more equal weighting with the economy in decision making, and
• there will be a focus on monitoring and compliance so that the consent doesn’t sit on a shelf after it is granted.

Proponent’s that rely on the Mining SEPP to carry out their operations should start giving consideration to how the SEPP can be improved, such as by the following means:

• examples of exempt and complying development that have minimal environmental impact and which should be included in the Mining SEPP
• dealing with issues faced in the implementation of the Gateway process, and
• changes to the application of clause 12AA regarding the significance of the resource.

Further updates on the proposed reforms to the Mining SEPP will be provided in due course.

Samantha Daly, Patrick Holland, Kate Swain