The PCIP Regulations came into operation on 1 November 2019 through Government Notice (GN) No 782 of 2019 to regulate and govern the corporate integrity pledge programme related to upstream activities, midstream activities and downstream activities in Tanzania. The PCIP Regulations have been made under Section 223 (3) of the Petroleum Act 2015.
- Corporate integrity pledge: has been defined to mean a formal, unilateral and concrete expression of commitment by contractors, sub-contractors, licensee or any other person to uphold anti-corruption principles for corporation, abide to ethical business practices, support a national campaign on ethics and war against corruption.
- Covered persons: these include all owners who are natural persons (other than shareholders who: have an ownership interest of less than five percent (5%) and acquired the ownership interest through public trading); all officers, directors, and employees of the contractor, sub-contractor, licensee or any other person who have responsibilities relating to petroleum activities and petroleum operations.
Objectives of the Corporate Integrity Pledge
- In terms of Regulation 4, the objectives of the corporate integrity pledge are: –
- to develop a nation of high integrity, that is resilient and embraces universal good values;
- to promote integrity, accountability and proper management of anti-corruption programmes, for adoption by the corporate community;
- to reinforce corporate governance, integrity, transparency and accountability in the daily operational processes and procedures of companies and businesses;
- to facilitate, support and provide technical assistance for companies and businesses to implement the corporate integrity system as an effective preventive measure against corrupt and unethical practices;
- to ensure proper insurance cover against losses, injuries or damage to environmental, communities, individual and properties that may be occasioned in the course of carrying petroleum operations; and
- to complement the Prevention and Combating of Corruption Bureau efforts to setup the best business practice in Tanzania.
Obligations of the Contractor, subcontractor, licensee or any other person
- The contractor, subcontractor, licensee, or any other person are required to establish and maintain a compliance programme throughout the term of the licence the following elements, namely, compliance responsibilities of a contractor, subcontractor, licensee, employees and the Board of Directors; written standards such as Code of Conduct, policies and procedures; training, awareness campaigns and education; review of procedures including the general description, Independent Review Organization (IRO) Reports, validation review, independence and objectivity certifications; a disclosure programme to facilitate communication; ineligible persons which include an individual or entity that is currently excluded, debarred, suspended, or otherwise ineligible to participate in the petroleum activities or has been convicted of a criminal offense; any notification of Government investigation or legal proceedings; and monitoring and reviews, including observations, record reviews, reporting and follow-ups.
- Filling in of the Corporate Integrity Pledge Checklist and sign a corporate integrity pledge form with any person being engaged to undertake to comply with corporate integrity pledge requirements.
- There is the obligation to communicate (as well as publish on their websites) and ensure compliance of the corporate integrity pledge policies, procedures and obligations to any person engaged to perform an aspect of petroleum activity.
- Submit to PURA or EWURA within 45 days of the beginning of the anniversary of the Contractor, subcontractor, licensee or any other person annual integrity pledge performance report as prescribed by PURA covering all its projects and activities for the year under review.
- Submit to PURA or EWURA a programme to manage and foster high integrity culture among employees with elements such as clear, practical, accessible, effectively implemented and enforced proportionate procedures to prevent potential integrity issues; top leadership commitment to fight corruption and foster the culture of zero tolerance against all form of bribery and corruption; risk assessment on internal and external factors to identify potential integrity issues; due diligence in respect of the entities who will perform services for or on behalf of the company in order to mitigate potential integrity issues; communication and training to ensure good understanding and effective implementation of anti-corruption and bribery policy; and monitoring and review of procedures and integrity programmes for effective implement
- Engage an IRO such as an accounting, auditing, or consulting firm to perform and submit reviews in assessing and evaluating operation within ninety (90) working days after the effective date as PURA or EWURA may require.
- The Board of Directors or Committee is responsible for the review and oversight of matters related to compliance with the petroleum activities requirements, Government requirements, and the obligations of PCIP Regulations. Companies are also required to appoint a chief compliance officer, who will be a member of senior management responsible for developing and implementing policies, procedures, and practices designed to ensure compliance with the requirements set forth in the PCIP Regulations. The Board is also required to issue a resolution to the effect that it has made a reasonable inquiry into the operations of the Company’s compliance programme including its effectiveness and receiving updates about the performance and activities of the Chief Compliance Officer and other compliance personnel and concluded that they have implemented an effective compliance programme to meet the best international petroleum industry practices requirements, the Government requirements, and the obligations of the corporate integrity programme.
Monitoring and Enforcement
- PURA and EWURA are responsible for the monitoring and investigations of possible violations of the PCIP Regulations through the enforcement of the CIP and in doing so they have the power to summon any person to submit information to enable them discharge their duties, suspend or revoke any license.
Breach and default
- Failure to: – establish and implement any of the prescribed obligations under the PCIP Regulations; submit implementation report or any annual report to PURA or EWURA; or submit any IRO Reports by the contractor, sub-contractor, licensee, or any other person amounts to a breach liable to a penalty of Tanzania shillings five million which begins to accrue on the day after the date the obligation became due for each day that the failure continues.
- Failure to grant access as required by the contractor, sub-contractor, licensee, or any other person amounts to a breach liable to a penalty of Tanzania shillings three million which begins to accrue on the day after the date the obligation became due.
- False certification submitted by the contractor, sub-contractor, licensee, or any other person amounts to a breach liable to a penalty of Tanzania shillings ten million.
- Failure to comply fully and adequately with any obligations under the PCIP Regulations by the contractor, sub-contractor, licensee, or any other person amounts to a breach liable to a penalty of Tanzania shillings two million which begins to accrue ten working days after the contractor, sub-contractor, licensee, or any other person receives a notice from PURA or EWURA of the failure to comply.
- Further, it should be noted that any person who contravenes the PCIP Regulations or fails to do any act where no specific penalty is prescribed, commits an offence liable to a fine of not less than Tanzania shillings ten million.
- A contractor, sub-contractor, licensee, or any other person who fails to: – communicate integrity pledge policies, procedures and obligations to any person they engage to perform an aspect of petroleum activity; carries out petroleum activities without signing an integrity pledge; does not monitor and ensure compliance with corporate integrity pledge and obligations; or submits to PURA or EWURA an annual integrity pledge performance report covering all its projects and activities for the year under review which is contrary to the PCIP Regulations commits an offence liable to a penalty of one hundred million Tanzania shillings in the first instance and a further penalty of five percent of the penalty for each day that the contravention of the PCIP Regulations continues.
- It should be noted that any person who fails to comply with an integrity pledge will be in breach of the conditions of the licence or permission to engage in the regulated activity liable to having such licence or permission withdrawn or cancelled and the Government shall exercise the right of takeover facilities provided under the Petroleum Act.
These insights are of a general nature; the developments and impact of these legislative developments and our analysis have only been summarized here. This is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice and after a thorough examination of the particular situation.