BUSINESS LAW AND ETHICS

Assignment Brief

BUSINESS LAW AND ETHICS (LLB)

LAW4004-B

MAIN COURSEWORK ASSIGNMENT 2018-19

Please submit your assignment electronically through Canvas under the Assignments tab. Failure to submit, including late submissions without an authorised extension, will be considered as non-submission and you will receive a mark of zero. Following submission your assignment will be checked for plagiarism using Turnitin.  Further details on how to submit electronically can be found on Canvas under the Assignments tab. 

Assessment Criteria:

You will be assessed on your fulfilment of the module learning outcomes according to your ability to:

1. Describe legal institutions, rules and principles as they apply in a business context;

2. Apply legal and business knowledge to solve legal and business related problems;

3. Work effectively as a member of a group;

4. Communicate effectively in writing;

5. Reflect on your own learning;

6. Act as an ethical professional who is aware of the cultural and social contexts of business and law and is responsive to changing environments.

The Case Study

East West Organic Food Limited (EWOFL) supplies organically produced food, drink, and clothing to retailers and restaurants throughout the UK. EWOFL sources its products from national and international producers who comply with EU and UK regulations for organic certification. The company, based in Leeds, employs over 150 staff to carry out its purchasing, sales, marketing and supply operations.

EWOFL is very profitable and enjoys an excellent reputation for high quality products and for its commitment to sustainability and diversity. The company’s success is based on providing premium products at competitive prices without compromising its principles. EWOFL’s website celebrates the company’s role as a standard-bearer for ethical business and social responsibility. It places equivalent value on the interests of its shareholders, employees, customers, suppliers, and connected stakeholders, stating that:

 ‘While commercial success is essential for any business, for EWOFL the bottom line is about ethics as well as economics, about fairness as well as finance’.

You are employed as the head of EWOFL’s in-house legal department. Your job is to provide legal guidance to the company in relation to its general activities – covering regulatory compliance, employment, and contractual matters – and in relation to any disputes which may arise. Your role requires you not only to advise the board of directors and management on legal issues but to take into account ethical issues, wherever the latter might be seen as an important consideration and, in particular, where they might affect EWOFL’s reputation and commercial relationships.

You find your job fascinating and fulfilling. Legal issues and ethical issues constantly arise. The company regards legal compliance as a fundamental requirement. Compliance is usually straightforward but complex legal questions can crop up. Legal disputes are generally harder to resolve, as the outcome of litigation is frequently uncertain and the pros and cons of litigation, as opposed to alternative forms of dispute resolution, are often difficult to gauge. You have to know when to rely on your own legal and commercial expertise and when to seek specialist legal advice from outside. Ethical dilemmas can be relatively straightforward, given EWOFL’s ethos. However, they can often prove immensely tricky as there is rarely, if ever, a single right answer.

In the first few months of 2019 you have to deal with a wide range of matters that have legal, ethical, and commercial implications. The four most serious matters are set out below:

EWOFL has a contract to supply organically-cultivated mangoes and other tropical fruits to Mayflower Plc, a leading supermarket chain. The contract is valuable in itself and part of a series of supply contracts with Mayflower which account for a significant part of EWOFL’s business. The contract stipulates that the mangoes will be certified as organic under the regulations of the country of origin and satisfy EU regulations on organic labelling.

Alison has recently replaced David as EWOFL’s senior overseas buyer. David retired in December. Alison has spent the first few weeks in her new role travelling round EWOFL’s overseas suppliers and producers and exploring possible additions and alternatives. While in India she has been to see Zest, EWOFL’s Indian supplier of organic mangoes, and the farmer producers that supply Zest. On her visits to the farms she tested the soil, trees, and fruit to ensure that the mangoes are produced without synthetic pesticides or fertilisers. She also discussed crop varieties, crop forecasts, and profitability with the farmers. On her visit to Zest she checked on certification compliance, packaging and labelling, and discussed quality control, costs, and other contractual matters with Zest’s owner, Sunny.

The tests have been satisfactory and Alison is pleased with the quality of the mangoes being produced. However, by the end of her visit, she has serious concerns about the following aspects of the relationship with Zest:

Although the mangoes have the required organic certification, the certification process is highly bureaucratic, inconvenient and prolonged. Sunny cuts through this red tape by paying the agricultural officers what he calls a ‘facilitation fee’. These officers are civil servants and not well paid. Such unofficial opportunities to supplement their income are tacitly approved by their managers.

Sunny assured Alison that these payments are culturally normal and, in any case, do not affect the cost to EWOFL. It is the farmers who fund the payments through an agreed deduction from their invoices to Zest. Sunny explains that he makes a further small deduction from each invoice by way of a ‘gratuity’ which he has always shared with David and will now share with Alison. According to Sunny the farmers are only too happy to agree to this as it gives them the security of knowing that Zest will be loyal to them rather than look elsewhere.

For her part, Alison knows that the farmers’ profit-margin leaves the smaller producers close to subsistence level and with little scope to invest in improvements or develop their business. The farmers told her that the deductions imposed by Zest are something they have to put up with as the price of staying on their farms, where their families have been for generations. Without the guaranteed income from Zest they would probably have to sell their land to one of the large, corporate farming companies. On the other hand, without the deductions they would earn enough to improve their operations and circumstances and invest for the future with confidence.

On her return to EWOFL’s UK office Alison tells you what has happened and what she has discovered. She has no concerns about the quality of the mangoes or their organic credentials but she is very concerned about the payments to the local Indian officials and the deductions from the payments due to the farmers.

Explore and analyse the legal and ethical issues facing EWOFL in the light of Alison’s discoveries.

Sample Answer

Legal and Ethical Challenges in International Supply Chains

Introduction

Globalisation has created opportunities for businesses like East West Organic Food Limited (EWOFL) to expand their operations, build international partnerships, and source high-quality products from overseas suppliers. However, such expansion brings complex legal and ethical challenges, especially when working in countries where business practices and regulatory enforcement differ from the United Kingdom’s standards. This case explores how EWOFL, an ethically driven British company, should respond to revelations concerning bribery and exploitative practices within its Indian supply chain. The situation involving Alison, the company’s senior overseas buyer, raises concerns about corruption, fairness in trade, and compliance with international and domestic legal frameworks. The analysis below examines the legal implications, the ethical dilemmas involved, and the broader reputational and operational consequences for EWOFL.

Legal Issues in the Case

The first and most serious legal concern relates to the payment of “facilitation fees” to Indian agricultural officers. Under the UK Bribery Act 2010, facilitation payments are illegal, regardless of whether they are customary in another jurisdiction. Section 6 of the Act prohibits bribery of foreign public officials, making it a criminal offence to offer or authorize a payment intended to secure an improper business advantage. The fact that these payments are culturally accepted in India does not exempt EWOFL or its agents from liability under UK law. EWOFL could face prosecution if it is shown to have failed to prevent bribery, even if the payments were made indirectly through its supplier, Zest. Moreover, the act imposes strict liability on corporations for failing to prevent bribery unless they can demonstrate that adequate procedures were in place to prevent such conduct.

A second legal issue concerns the deductions made by Zest from the farmers’ payments to cover these facilitation fees and the so-called “gratuities” shared with EWOFL’s previous overseas buyer, David. This arrangement potentially violates the Modern Slavery Act 2015, which requires UK companies to ensure their supply chains are free from exploitation, coercion, or unfair treatment. By allowing deductions that leave small farmers at subsistence levels, Zest may be engaging in exploitative practices that contradict fair trade principles. If EWOFL knowingly continues such a relationship without intervention, it could be accused of complicity in unethical or unlawful practices.

Lastly, EWOFL’s contractual obligations to Mayflower Plc are at risk. If Mayflower discovers that the products it purchases are linked to corrupt or exploitative practices, it may terminate the contract on grounds of reputational damage or breach of ethical sourcing policies. Such a development could lead to financial losses and potential litigation for breach of warranty or misrepresentation, especially if EWOFL has contractually assured ethical compliance.

Ethical Issues and Dilemmas

The ethical dimension of this case is equally significant. EWOFL promotes itself as a company committed to sustainability, fairness, and ethical business. The discovery that its supplier engages in bribery and exploits farmers directly contradicts its corporate values. The ethical dilemma lies in balancing cultural sensitivity and practical realities in India against universal ethical principles such as integrity, fairness, and transparency.

From an ethical relativist perspective, one might argue that facilitation payments are culturally acceptable in India and thus should not be judged by Western standards. However, under universalist ethical theories such as Kantian deontology, bribery is inherently wrong because it undermines honesty and justice, regardless of context. EWOFL’s ethical stance, expressed in its mission statement, clearly aligns with the latter view, suggesting that any tolerance for such payments would compromise the company’s moral integrity.

The treatment of the farmers also raises concerns about distributive justice and corporate social responsibility. The deductions imposed by Zest effectively trap small farmers in a cycle of dependency and poverty. This situation conflicts with ethical theories of fairness and equality, particularly those advocated by philosophers like John Rawls, who emphasized that social and economic arrangements should benefit the least advantaged members of society. For EWOFL, maintaining a relationship with Zest without demanding reforms would mean prioritising profit and convenience over human welfare and sustainability.

Corporate Responsibility and Reputational Risk

EWOFL’s reputation as an ethical company is one of its greatest assets. The revelation of bribery or exploitation in its supply chain could lead to severe reputational harm. In today’s business environment, stakeholders, including customers, investors, and regulators, expect transparency and adherence to ethical sourcing standards. Negative publicity could result in consumer boycotts, loss of business partnerships, and long-term damage to brand credibility.

Corporate responsibility frameworks such as the UN Global Compact and the OECD Guidelines for Multinational Enterprises emphasise the need for companies to operate with integrity and respect for human rights. EWOFL’s adherence to these principles should not merely be symbolic but operational, guiding its actions and decisions. In this context, the company should conduct an internal review of its supplier relationships, establish strict anti-bribery policies, and implement due diligence procedures to ensure compliance throughout its supply chain.

Recommended Actions for EWOFL

EWOFL must act decisively to address both the legal and ethical issues. First, it should immediately suspend its dealings with Zest until a full investigation is completed. If the allegations of bribery and farmer exploitation are confirmed, the company should terminate the contract and seek alternative suppliers who comply with both UK laws and ethical trade standards.

Second, EWOFL should enhance its compliance framework by adopting a robust anti-bribery policy aligned with the UK Bribery Act 2010. Training sessions should be conducted for all overseas buyers and managers to ensure they understand the legal implications of facilitation payments and other unethical practices. In addition, the company should establish a system for anonymous reporting of unethical behaviour within its supply chain.

Continued...