Anti-bribery policy

ANTI-CORRUPTION AND BRIBERY POLICY

FOREWARD

This policy sets out the general rules and principles to which we adhere. It will be communicated to all businesses and employees overseen by the JKX Oil & Gas Plc (“JKX”) UK board, as well as relevant business partners and other necessary individuals and entities. The policy applies to all individuals working at all levels and grades within the JKX group of companies including senior managers, officers, directors, employees (whether permanent, fixed-term or temporary), consultants, contractors, trainees, seconded staff, homeworkers, casual workers, agency staff or any other person associated with us or any of our subsidiaries or their employees, wherever located. Those who work in areas within our business identified as being particularly high risk will receive additional training and support in identifying and preventing corrupt activities.

This policy explains the procedures through which JKX can maintain its ethical standards and protect its reputation against any allegations of bribery and corruption. Its successful implementation requires pro-active adoption at the following levels:

All employees of JKX.
Local Management – The business unit’s overall compliance with the requirements of this policy is the responsibility of the Local Managing Director.
Local Finance Directors, subject to approval by Local Managing Directors, will ensure their business unit’s adherence to the relevant sections of this policy.
JKX Oil & Gas Plc – The Board will assist each business unit with continuous refreshing and reinforcing of this policy via application guidance and monitoring.

1. INTRODUCTION

It is JKX’s policy to conduct business in an honest way, and without the use of corrupt practices or acts of bribery to obtain an unfair advantage.

JKX is committed to ensuring adherence to the highest legal and ethical standards. This must be reflected in every aspect of the way in which we operate. We must bring integrity to all our dealings. Bribery and corruption harms the societies in which these acts are committed and prevents economic growth and development.

This is not just a cultural commitment on the part of the organisation; it is a moral issue and a legal requirement. Bribery is a criminal offence in some of the countries in which JKX operates, and corrupt acts expose the Company and its employees to the risk of prosecution, fines and imprisonment, as well as endangering the Company’s reputation.

This policy has been adopted by the JKX main board and is to be communicated to everyone involved in our business to ensure their commitment to it. The board attaches the utmost importance to this policy and will apply a “zero tolerance” approach to acts of bribery and corruption by any of our employees or by business partners working on our behalf. Any breach of this policy is regarded as a serious matter by the Company and is likely to result in disciplinary action.

2. WHAT IS BRIBERY AND CORRUPTION?

Bribery and corruption has a range of definitions in law, but the fundamental principles apply universally.

Bribery is the offer, promise, giving, demanding or acceptance of an advantage as an inducement for an action which is illegal, unethical or a breach of trust.

Corruption is the misuse of public office or power for private gain; or misuse of private power in relation to business outside the realm of government.

Acts of bribery or corruption are designed to influence the individual in the performance of their duty and incline them to act dishonestly potentially breaking existing law in order to obtain personal benefit. For the purposes of this policy, whether the payee or recipient of the act of bribery or corruption works in the public or private sector is irrelevant.

The person being bribed is generally someone who will be able to obtain, retain or direct business. This may involve sales initiatives, such as tendering and contracting; or, it may simply involve the handling of administrative tasks such as licences, customs, taxes or import/export matters. It does not matter whether the act of bribery is committed before or after the tendering of a contract or the completion of administrative tasks.

3. WHAT IS A BRIBE?

A bribe is an inducement or reward offered, promised or provided in order to gain any commercial, contractual, regulatory or personal advantage.

Bribes can take on many different shapes and forms, but typically they involve corrupt intent. There will usually be a 'quid pro quo' – both parties will benefit. A bribe could be the:

Direct or indirect promise, offering, or authorisation, of anything of value (tangible or intangible)
Offer or receipt of any kickback, loan, fee, reward, discount or other advantage
Giving of aid, donations or voting designed to exert improper influence

4. WHO COULD BE AT RISK OF ENGAGING IN BRIBERY OR CORRUPTION?

In the eyes of the law, bribery and corrupt behaviour can be committed by:

An employee, officer or director
Any person acting on behalf of the Company (eg our contractors or business partners)
Individuals and organisations where they authorise someone else to carry out these acts on the Company’s behalf

Acts of bribery and corruption will commonly, but not always, involve public or government officials (or their close families and business associates) who have the power to perform legitimate actions. For the purposes of this policy, a government official could be:

A public official, whether foreign or domestic
A political candidate or party official
A representative of a government-owned/majority-controlled organisation
An employee of a public international organisation

5. WHAT DOES THE LEGISLATION SAY ABOUT BRIBERY AND CORRUPTION?

Bribery is a criminal offence in some countries in which JKX operates, and penalties can be severe. In the UK the Bribery Act 2010 not only makes bribery and corruption illegal, but also holds UK companies liable for failing to implement adequate procedures to prevent such acts by those working for the company or on its behalf, no matter where in the world the act takes place. In addition, current US legislation (Foreign Corrupt Practices Act or FCPA) offers similar prohibitions and potential penalties and is enforced with vigour by the US authorities. It is therefore in your own individual interests, as well as those of JKX, that you act with propriety at all times. Corrupt acts committed abroad, including those by business partners working on the company’s behalf, may well result in a prosecution at home or in the UK.

6. STEPS CAN WE TAKE TO PREVENT BRIBERY AND CORRUPTION

We can take the following steps to assist in the prevention of bribery and corruption:

A. Risk Assessment

Effective risk assessment lies at the very core of the success or failure of this policy. Risk identification pinpoints the specific areas in which we face bribery and corruption risks and allows us to better evaluate and mitigate these risks and thereby protect ourselves. Business practices around the world can be deeply rooted in the attitudes, cultures and economic prosperity of a particular region – any of which can vary. Local Management must assess the vulnerability of each business unit to these risks on an ongoing basis, subject to review by Divisional Finance Directors, the Group Compliance Officer and the JKX Group Finance Director.

Risk assessment is an ongoing process with continuous communication between Local Management, the Group Compliance Officer and the Group Directors.

B. Accurate Books and Record-Keeping

Many serious global bribery and corruption offences have been found to involve some degree of inaccurate record-keeping. We must maintain accurate books, records and financial reporting within all JKX business units and for significant business partners working on the Company’s behalf. Our books, records and overall financial reporting must also be transparent. That is, they must accurately reflect each of the underlying transactions. False, misleading or inaccurate records of any kind could potentially damage JKX in a number of ways.

C. Effective Monitoring and Internal Control

JKX businesses must all maintain an effective system of internal control and monitoring of our transactions. Once bribery and corruption risks have been identified and highlighted via the risk assessment process, procedures can be developed within a comprehensive control and monitoring programme in order to help mitigate these risks on an ongoing basis.

Each Divisional Finance Director must ensure that Local Management engages in effective risk assessment and implements the necessary steps to prevent bribery and corruption. As these steps will vary by geography and business unit, Divisional Finance Directors should consult with the Group Compliance Officer, who will make available guidelines, principles and methodologies for the identification, mitigation and monitoring of these risks.

7. WHERE DO THE BRIBERY AND CORRUPTION RISKS TYPICALLY ARISE?

Bribery and corruption risks typically fall within the following categories:

A. Use of Business Partners

The definition of a business partner is broad, and includes agents, joint venture partners, contractors or partners in JKX’s service providers who act on behalf of the Company. Whilst the use of business partners can help us to reach our goals, JKX employees need to be aware that these arrangements can potentially present JKX with significant risks.

Risk can be identified where a business partner conducts activities on JKX’s behalf, so that the result of their actions can be seen as benefiting JKX.

Business partners who act on JKX’s behalf must be advised of the existence of and operate at all times in accordance with this policy. Local Management is responsible for the evaluation of each relationship and determining whether or not it falls into this category.

Where risk regarding a business partner arrangement has been identified, Local Management must:

Evaluate the background, experience, and reputation of the business partner
Understand the services to be provided, and methods of compensation and payment
Evaluate the business rationale for engaging the business partner
Take reasonable steps to monitor the transactions of business partners appropriately
Ensure there is a written agreement in place which acknowledges the business partner’s understanding and compliance with this policy

JKX is ultimately responsible for ensuring that business partners who act on the Group’s behalf are compliant with this policy as well as any local laws. Ignorance or “turning a blind eye” is not an excuse. As the business partner evaluation process will vary by business unit and type of business partner, Local Management should consult in the first instance with their Divisional Finance Director. Local Management and Divisional Finance Directors should consult with the Group Compliance Officer where necessary.

B. Gifts, Entertainment and Hospitality

Gifts, entertainment and hospitality include the receipt or offer of discounts, gifts, meals or tokens of appreciation and gratitude, or invitations to events, functions, or other social gatherings, in connection with matters related to JKX business. These activities are acceptable provided they fall within reasonable bounds of value and occurrence.

How to evaluate what is ‘acceptable’ or not:

First, you must take a step back and ask themselves the following:

What is the intent – is it to build a relationship or is it something else?
How would this look if these details were on the front of a newspaper?
What if the situation were to be reversed – would there be a double standard?

If you find it difficult to answer one of the above questions, there may a risk involved which could potentially damage JKX’s reputation and business. The action could well be unlawful.

Although no two situations are the same, the following guidance should be considered globally:

Never acceptable

Circumstances which are never permissible include examples that involve:

A quid pro quo (offered for something in return)
Gifts in the form of cash/or cash equivalent vouchers
Entertainment of a sexual or similarly inappropriate nature
Engaging in any activity that would lead to a breach of this policy

As a general rule, JKX employees and business partners should not provide gifts to, or receive them from, those meeting our definition of a government official (or their close families and business associates). However, we do understand that in certain countries gift giving and receiving with these individuals is a cultural norm. If you are faced with such a situation, please consult with the Group Compliance Officer before proceeding.

Usually acceptable

Possible circumstances that are usually acceptable include:

Modest/occasional meals with someone with whom we do business
Occasional attendance at ordinary sports, theatre and other cultural events
Gifts of nominal value, such as pens, or small promotional items

A variety of cultural factors such as customs, currency and expectations may influence the level of acceptability. If you feel uncertain at any time regarding cultural acceptability of gifts, entertainment or hospitality, please consult the Group Compliance Officer. In addition, if an example does not fall under the above categories, please in the first instance seek guidance from the Group Compliance Officer. Generally, such examples would not be permissible without prior approval.

Transparency is key

Each Division will be required to maintain and monitor its Register for Gifts and Hospitality. Any form of gift, entertainment or hospitality given, received or offered – which meets or exceeds the equivalent of £100 in value – must be appropriately recorded in the register. In the event that an impermissible form of gift, entertainment or hospitality has been accepted, you must appropriately record the transaction within the register and contact the Group Compliance Officer immediately.

C. Facilitation Payments and Kickbacks

In many countries, it is customary business practice to make payments or gifts of small value to junior government officials in order to speed up or facilitate a routine action or process. It may be that we need to obtain licences or permits faster than the normal course; or, we may need lawfully to import or export books or materials.

Despite this, facilitation payments and kickbacks as defined here are against this JKX policy and we take the view that they are illegal within the UK as well as within most countries in which we operate. The UK Bribery Act 2010 makes no distinction between facilitation payments and bribes – regardless of size or local cultural expectations, even if that is “how business is done here”. However, in the event that a facilitation payment is being extorted, or if you are forced to pay under duress or faced with potential safety issues or harm, such a payment may be made, provided that certain steps are followed.

If you are ever placed in such a situation, you must contact the Divisional Finance Director or Group Compliance Officer as soon as possible and you must record the payment appropriately within JKX’s books and records to reflect the substance of the underlying transaction.

If you are unsure whether certain payments which resemble the definition of facilitation payments are permissible, please contact the Group Compliance Officer.

8. DONATIONS

JKX does not make contributions to political parties. JKX makes charitable donations from time to time. These are legal and ethical under local laws and practice.

9. LOCAL ADAPTION

In order for this policy to be effective, it is necessary for it to be applied across the Group worldwide, taking into consideration the diverse cultural environments in which we operate. This may require each business unit to adapt certain sections of this policy – such as gifts, entertainment and hospitality – to ensure they are fair, appropriate and applicable.

Local Management – in conjunction with Divisional Finance Directors – are responsible for reporting and confirming any local adaptations to this JKX Group Policy with the Group Compliance Officer.

10. POTENTIAL RISK SCENARIOS

Here are some “red flags” to be on the lookout for in proposed third party relationships because they can often be used to make an indirect bribe:

Payments to shell companies or to companies whose ownership is not transparent;
Payments to offshore bank accounts;
Payments to entities owned or controlled by government officials, their close relatives, or business associates;
Requests for false or misleading documentation.
“Donations” to individuals;
Cash transactions;
Services provided free of charge or at a non-market price;
Obtaining unreasonable discounts;
Doing business with people or entities that are known to engage in bribery or who are suspected of engaging in bribery;

If you become aware of any of these situations or others that suggest the possibility of improper payments, it does not necessarily mean that improper conduct is underway; however, they cannot be ignored. The existence of a red flag and the entering into or continuing of a relationship with a third party where a red flag has been identified must be carefully considered. If you have any doubts, please contact the Group Compliance Officer.

11. HOW TO RAISE A CONCERN

All individuals who work on behalf of JKX have a responsibility to help detect, prevent and report instances not only of bribery, but also of any other suspicious activity or wrongdoing. JKX is absolutely committed to ensuring that all of us have a safe, reliable, and confidential way of reporting any suspicious activity. We want each and every one to know how they can “speak up”.

If you have a concern regarding a suspected instance of bribery or corruption, please speak up – your information and assistance can only help. The sooner you act the better for you and for the Company. To help, we have created multiple channels to allow you to do this.

If anyone is concerned that a corrupt act of some kind is being considered or carried out – either within JKX, by any of our business partners or by any of our competitors – you must report the issue/concern to your Line Manager, Divisional Finance Director and/or the Group Compliance Officer. If for some reason it is not possible to speak to your Line Manager, please then report it to another Senior Manager, Local Finance Director or the Company Secretary.

If you are not comfortable with speaking directly to a colleague or anyone mentioned above, JKX has introduced an online reporting facility (www.expolink.co.uk) for all employees and relevant business partners to use. The online facility has the capacity to handle anonymous complaints.

In the event that an incident of bribery, corruption, or wrongdoing is reported, JKX will act as soon as possible to evaluate the situation. JKX has clearly defined procedures for investigating fraud, misconduct and non-compliance issues and these will be followed in any investigation of this kind. We reserve our right to terminate our contractual relationship with other workers if they breach this policy.

If you have any questions about these procedures, please contact the Group Compliance Officer.

12. PROTECTION

Workers who refuse to accept or offer a bribe, or those who raise concerns or report another’s wrongdoing, are sometimes worried about possible repercussions. We aim to encourage openness and will support anyone who raises genuine concerns in good faith under this policy, even if the turn out to be mistaken.

We are committed to ensuring no one suffers any detrimental treatment as a result of refusing to take part in bribery or corruption or because of reporting in good faith their suspicion that an actual or potential bribery or other corruption offence has taken place or may take place in the future.

If you believe that you have suffered any such treatment, you should inform the Divisional Finance Director or the Group Compliance Officer or the Company Secretary immediately.

13. RESPONSE

Where an initial report of potential bribery or fraud has been made under the procedure described above, the delegated business unit representative in collaboration with the Group Compliance Officer will liaise with the Group Finance Director to determine whether the report warrants a detailed investigation. Where a detailed investigation is appropriate, an investigating officer or team possessing the necessary forensic expertise will conduct the detailed investigation under the direction of the Board of JKX.

Legal guidance may be appropriate on the conduct of the investigation to ensure that due process is followed in conducting the case and, on the conclusion of the investigation, including any actions to be taken as a consequence of the findings.

Security of Evidence

The person delegated with the responsibility for the investigation, is responsible for ensuring that evidence, physical assets and records, which may be used in subsequent investigations, are secured at an early stage of the investigation.

Personnel being investigated for suspected bribery or fraud may be denied access to JKX’s premises and information systems.

The details of investigations performed and documentation produced are to be managed and retained in accordance with JKX’s Data Protection and Privacy Policy.

Personal Security

Consideration is given to the need to provide security, or access to security, for the person reporting the suspicion or incident of bribery or fraud, their family members, members of the investigating team and employees closely associated with the gathering of evidence.

Retaliation against anyone for raising a legitimate concern or assisting to address bribery, fraud or other ethical matter is not tolerated by JKX. Retaliation is grounds for serious action to be taken against the guilty party which could include dismissal.

The principles of natural justice will be applied in all cases against any person being investigated following an allegation of bribery or fraud.

14. CONCLUSION AND APPROVAL

It is the ultimate responsibility of the main board routinely to refresh and reinforce this policy and its underlying principles and guidelines. Local Management, under the overview of Divisional Finance Directors, are responsible for the establishment and ongoing monitoring of compliance with sections 6, 7, 8 and 9 of this policy. All JKX subsidiary employees and relevant business partners are responsible for annual certification as to the receipt and understanding of this policy as part of our annual compliance training.

September 2011
JKX Oil & Gas Plc

STATEMENT OF ETHICS

Wherever JKX conducts business we aspire to act fairly, ethically, honestly and with accountability.

JKX has a number of fundamental principles and values which it believes are the foundation of sound and fair business practise and as such are important to uphold. One such principle is a zero tolerance position in relation to bribery and corruption, wherever and in whatever form that may be encountered. This statement is intended to clearly state the standards and principles required to ensure conformance to JKX’s principles and to legal requirements within the countries in which JKX and its subsidiary companies operate.

Legal Obligation

It is JKX’s policy to comply with all laws, rules, regulations and laws governing anti-bribery and corruption, in all the countries in which JKX operates. We believe it is a fundamental principle of good business practice to respect local laws and customs when operating internationally. However, as a United Kingdom (UK) company, JKX is also bound by the laws of the UK, which governs our conduct both at home and abroad.

Under UK law, bribery and corruption is punishable for individuals by up to 10 years imprisonment, and if the company is found to have taken part in corruption it could face an unlimited fine and face untold damage to its reputation. JKX takes its legal obligations in this area very seriously.

Under UK law the payment, or offer to pay bribes, or provision of or offer to provide gifts or anything of value for improper purposes to obtain or retain business or any other benefit, (whether for JKX or any other party) is prohibited. Such payments or gifts are also forbidden under the terms of this policy and may result in immediate dismissal for those involved in their payment or receipt.

JKX is required to keep financial records and to have appropriate internal controls in place which will evidence the business reason for making payments to third parties.

Policy

Our Anti-Corruption and Bribery Policy is for the protection of our staff as much as for JKX. Our Anti-Bribery and Corruption Policy applies to individual employees, agents, workers, sponsors, intermediaries, consultants or any other persons or bodies associated with JKX or any of its subsidiaries and employees.

Bribery is committed when an inducement or reward is provided in order to gain any commercial, contractual, regulatory or personal advantage for JKX or another party.
No bribes of any sort may be paid to or accepted from customers, suppliers, politicians, government advisors or representatives, private person or company. It is not permitted to establish accounts or internal budgets for the purpose of facilitating bribes or influencing transactions.

Our policy does not prohibit the following practices providing they are customary in a particular market, or are proportionate and are properly recorded:

Normal and appropriate hospitality (given or received)
The giving of a ceremonial gift of an appropriate cost and nature and at an appropriate time

JKX recognises that market practice varies across the international arena in which it does business and what is normal and acceptable in one place may not be in another.

JKX also appreciates that to refuse a gift in certain circumstances and/or countries would cause offence to our trading partners. The test to be applied in all circumstances is whether the gift or entertainment is reasonable and justifiable. Employees must always challenge themselves as to the intention of the gift Special care must be taken in accepting or giving gifts/entertainment and these are not permitted if it would create a real or perceived conflict of interest.

Expectations of JKX and Staff

The prevention, detection and reporting of bribery and corruption is the responsibility of all employees throughout the JKX Group. Suitable channels of communication by which employees or others can report confidentially any suspicion of bribery will be maintained and employees may use the confidential hotline. Details of which can be found in the Anti-Bribery and Corruption Policy and Employee Handbook.

Further Guidance

Inevitably, decisions as to what is acceptable may not always be easy, particularly in the absence of minimum legal standards or where they are poorly enforced. If anyone is in doubt as to whether a potential act constitutes bribery/corruption, or has any doubt or queries regarding this statement please refer to the Anti- Bribery and Corruption Policy or speak with your immediate manager, supervisor or the Company Secretary.

The Group Chief Executive has lead responsibility for policy implementation within the Group and this policy is signed by the CEO to demonstrate the Board’s commitment.