Kevin Abikoff of Hughes Hubbard Discusses the Benefits and Risks of African Local Content Laws

Kevin Abikoff was featured in an Foreign Corrupt Practices Act (FCPA) Report Q&A regarding how to navigate the corruption risks of African local content laws, which require foreign companies to invest in countries where they operate. 

In the February 10, 2016 article, Kevin explained that local content laws are beneficial in terms of technology transfer and local ownership but can also be a source of corruption risk. "While local content laws can be very beneficial to a country, they can be the single greatest cover for bad behavior," Kevin said. "While Africa is not alone in this, it is certainly operating at a much deeper and higher level in terms of local content, which creates unique risks for multinational companies operating there."

One of those risks is partnering with a local company with opaque ownership. "This means it isn't always easy to determine whether government officials, their family members or close friends are part of the ownership of the local affiliate," Kevin warned. Another risk is the partner may have secured its participation as the local-content provider through promises to government officials. "Essentially, the local-content partner effectively becomes a conduit for corrupt payments to government officials."

Kevin urged companies to apply a multifaceted approach to their anti-corruption programs. "To start, companies should perform some sort of reasonable due diligence to the extent possible," he said. "If it can, a company should also interview the owners of the possible partner face-to-face."

Kevin said companies can use training to prevent corruption associated with their local content partners. "Training the local partner can be very effective," he said. "Our experience shows that this can reduce the incidents of problematic conduct on the back end."