Do I have to submit to the internal regulations of my customers or contractual counterparties?

Jan 11, 2024

It is essential to review the contracts with my related third parties and not rely on the fact that there is an identical standard clause in all of them and that it must be automatically accepted to enter into the contract“.

During a conversation related to the new Economic Crimes Law, a doubt arose as to whether there is a legal obligation that expressly orders me to submit to the internal regulations of third parties related to my activity. The above, considering that, in case it is effective, this implies that I must read, know and apply all the policies and manuals of my clients and eventually of other third parties.

In this sense, and at least as far as a contractual relationship with clients or counterparties on an equal negotiating footing is concerned, it is reasonable to maintain that if I sign a contract with a third party, in which my complete opposition to the commission of crimes within my organization is expressly mentioned, and I have a living, controlled and regularly updated prevention model, it should not be imperative to submit to the self-regulation of my related parties.

In addition to being somewhat extreme to require all companies to comply with each of the internal obligations of their related parties, which usually depend on the needs, logic and legal techniques of each regulation of origin, it is extremely costly in terms of time and efficiency to think that each company has to submit, pure and simple, to each and every one of the policies and manuals that make up the Crime Prevention Model of the related third parties, simultaneously circumventing its potential application and also watching to be aware of the possible modifications of each of such models (in foreign computer servers, and sometimes even foreign ones), which is what is usually asked to accept, ex ante, in such type of regulations.

Although the “obligation” referred to above is inserted in the context of the elements that a crime prevention model must contain, according to the provisions of Article 3 N°3 of Law No. 20,393, in practice it is observed that these obligations, prohibitions and sanctions mainly deal with the establishment of specific prohibitions related to certain issues (e.g., making facilitation payments, making decisions through undeclared conflicts of interest, carrying out illicit activities in the context of the execution of the contract) and compliance with obligations to report any suspicious situation through the channels of the contract, making facilitation payments, adopting decisions through undeclared conflicts of interest, carrying out illicit activities in the context of the execution of the contract) and compliance with obligations to report any suspicious situation through the established reporting channels, among other points.

But the problem, also practical, lies in the fact that the way of approaching how these obligations, prohibitions and sanctions are implemented for those who contract with another, has consisted, in general, in the supposed duty of having to accept, as it was pointed out, purely and simply, the totality of a certain Model of Crime Prevention that is imposed to the other, as a condition of the celebration of the respective contract.

Consequently, and considering the actual implementation of the new Law on Economic Crimes, it is somewhat unfeasible and excessive to think that all companies should sign the internal regulations of their related third parties and accept them as a closed bale. Notwithstanding the foregoing, the non-incorporation of clauses relating to compliance with the crime prevention model could entail risks for the supplier at the time of proving compliance with its management and supervision duties, especially when the liability of the legal entity for criminal acts committed in the context of the supplier/customer contractual relationship is at issue.

From a practical perspective, it should be noted that a serious and relevant situation involving the commission of an unlawful act will require addressing potential criminal contingencies as a first priority, which will allow early mitigation of potential contractual risks related to the breach of these clauses.

Thus, today it is essential to review the contracts with my related third parties and not to rest on the fact that there is a standard clause identical in all of them and that it must be accepted automatically or “sine qua non” to enter into the contract. We think that essential basic points of common objectives can be established with a view to safeguarding the legal assets protected by Law No. 20,393, such as the obligations, prohibitions and penalties already mentioned, and contractually refine the relevant points for both parties. But this does not mean that I am obliged to submit to the internal regulations of my suppliers and clients.

By the way, as part of such essential bases, the controls through the contracts and monitoring of the correct fulfillment of the services agreed in this one will be an important shield in the event that such third party commits a crime in the context of the functions subject of my contract.

Francisca Franzani | Compliance Group Director, Albagli Zaliasnik (az).

Andrés Illanes | Corporate Affairs Manager, Bodegas San Francisco.

Column available in El Mercurio Legal, January 09, 2024.

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