Arbitration involving Bribery and Corruption

FRA was instructed by an arbitration panel in a JAMS arbitration to provide expert evidence in circumstances where Party A had ceased payment of royalties to Party B, having argued that the payment arrangements raised red flags for bribery and corruption.

Party B refused to allow audit rights to Party A on the grounds of commercial sensitivities and the arbitration panel engaged FRA to act as an independent party to identify any corruption red flags associated with royalty payments executed prior to the arbitration proceedings.

Understanding the use of royalty funds

An FRA team requested detailed disclosures from Party B to start tracing the royalties from original payment to the final beneficiary.

FRA were required to identify:

• Individuals who were the ultimate beneficiaries of the royalty funds, including family members of key executives of Party B;
• Unidentified beneficial owners (UBOs) of intermediary entities;
• Assets purchased using royalty funds and how the assets were used; and
• Charitable or political donations made using the royalty funds.

Outcome

FRA were able to trace all royalty payments in the relevant period to a beneficiary, asset, or commercial activity. We also provided commentary on any potential red flags under the FCPA or UKBA.

The arbitration panel instructed royalty payments to resume in agreement with FRA’s findings that the royalty payments did not raise any red flags for corruption.