The new law – a reprise and an update
The Bribery Act 2010 (Act) received Royal Assent in April 2010 and is expected to come into force next year, in April 2011. The Act replaces and consolidates a number of bribery laws already in existence in the UK, but also introduces an important new offense: failure by a commercial organization to prevent bribery. The broad scope and uncertain regulatory guidance issued thus far creates considerable challenges for individuals and companies covered by the Act, and has led to one delay in implementation of the Act until next year. The following outlines key aspects of the new requirements, as well as the current guidance process for implementation of the new law.
The Act focuses on a "relevant function or activity" (Function). This definition encompasses any function of a public nature or any activity connected with a business, performed in a person's employment or performed by or on behalf of a body of persons. The person performing the function or activity must also be expected to perform it in good faith and/or impartially or to be in a position of trust.
Of critical importance, the Act catches Functions performed outside the UK, to the extent that the individual or entity engaged in conduct has a close connection with the UK (including being a British citizen, an individual usually resident in the UK or a body incorporated in any part of the UK).
Many of the offenses refer to "improper performance" of a Function. Improper performance is determined by what a reasonable person in the UK would expect, ignoring any local custom or practice unless the written law of the relevant country allows or requires the practice.
The general bribery offenses
The Act creates two general bribery offenses that encompass both the individual making a bribe, as well as the recipient:
- Bribing another person: A person commits an offense by offering, promising or giving a financial or other advantage to another person, directly or through an intermediary:
- intending that advantage to induce a person to perform improperly a Function or to reward a person for so doing (whether or not it is the same person to whom the advantage is offered) or
- knowing or believing that accepting the advantage would itself be improper performance of a Function.
- Being bribed: A person commits this offense by requesting, agreeing to receive or accepting a financial or other advantage, directly or through a third party, for his or her own or someone else's benefit: and
- that person intends that, as a consequence, there is improper performance of a Function or
- there is improper performance of a Function (whether as a reward, in anticipation of or as a consequence of the request, agreement or acceptance). The request, agreement or acceptance itself may be the improper performance of a Function.
Bribing foreign public officials
It is an offense to bribe a "foreign public official." Foreign public official is broadly defined to include legislative, administrative and judicial officials and employees, and the law is triggered when an individual:
- intends to influence the official in the official’s relevant capacity
- intends to get or keep business or a business advantage and
- offers or promises, directly or indirectly, any financial or other advantage to the official (or another person at the official's request or with agreement), and the written law that applies to the official does not allow or require him to be influenced.
Senior officer liability
There is a specific offense for senior officers. If any of the above bribery offenses are committed by a corporate body with the consent or connivance of a senior officer (or person purporting to act in that capacity), that senior officer or person may also be liable for the underlying offense.
Failure of commercial organizations to prevent bribery
Any organization (a partnership or incorporated body), formed or carrying on business in the UK, commits an offense if it allows anyone associated with it to bribe another person intending to get or keep business or a business advantage for the organization.
An associated person is someone who performs services for or on behalf of an organization and may include employees, agents or subsidiaries.
It is a defense for an organization to prove it had in place adequate procedures to prevent persons associated with it from engaging in this conduct.
As required by the Act, the Ministry of Justice is consulting on draft guidance (Guidance), which is intended to help commercial organizations show that they have in place adequate bribery prevention procedures. The consultation closes in November, and the Government then aims to publish the final Guidance early in 2011.
The Guidance takes the form of six principles that organizations should consider. The principles are: risk assessment; top-level commitment; due diligence; clear, practical and accessible policies and procedures; effective implementation; and monitoring and review.
Penalties for breach
The maximum penalty for the offenses is 10 years' imprisonment and/or an unlimited fine. For the "failure to prevent" offense, the fine alone applies.
The Act catches conduct outside the UK if the person engaging in it has a close connection with the UK (including being a British citizen, an individual usually resident in the UK or a body incorporated in any part of the UK).
The "failure to prevent bribery" offense catches a corporate body or partnership formed within the UK, regardless of where it carries on business, whether within the UK or elsewhere. If it is not formed within the UK, a corporate body or partnership comes within the scope of the Act if it "carries on a business, or part of a business" in the UK. The Act and its accompanying Explanatory Notes do not expand on what may be considered to be carrying on a business or part of a business in the UK. It is important to note that, for this offense, there is no need for the associated person (who has committed the act of bribery) to have a close connection with the UK.
Non-UK companies, global compliance and the FCPA
Non-UK companies that carry on any activity in the UK will need to consider whether their activity could be considered to be carrying on a business, or part of a business, in the UK. It may prove difficult to determine with any certainty whether some activities will bring a non-UK company within the scope of the Act. Carrying on business may be given a very broad meaning in English law. For instance, "business" does not necessarily involve any profit or gain. A single transaction could potentially, in certain circumstances, be considered to be carrying on a business. Additionally, determining whether an activity is carried out in the UK may also prove problematic.
If a non-UK company is deemed to be carrying out business within the UK, then the "failure to prevent bribery" offense will encompass all activities carried out by its associates, whether or not these activities are carried out in the UK.
Because of the extra-territorial effect of the Act, companies (UK and non-UK) will try to implement global standards against bribery. One big problem companies face is that the scope of the US Foreign Corrupt Practices Act (FCPA) is in some areas narrower than the Act. So companies that have FCPA-compliant global practices will need to make further changes to make those practices compliant with the Act. This update does not address the differences in detail, but companies should be aware that the FCPA, unlike the Act, specifically deals with improper payments to, or for the benefit of foreign public officials and exempts forms of facilitation payments.
The nature of the offenses gives companies one defense only – the “adequate procedures” defense. Companies will be worried that it may take some time for practices to emerge that are accepted as being “adequate,” particularly in some of the contentious and difficult areas discussed above. They may draw just a little comfort from the statements in the Guidance that prosecutors will use their discretion before prosecuting. First they will assess whether there is enough information for a conviction to be a realistic prospect. Then, they will consider whether prosecuting is in the public interest.
Additional requirements for companies in the UK regulated by the FSA
The Act does not differentiate between companies based on the nature of their business activities -- applying equally to both business regulated by other authorities (such as the FSA) as well as other commercial businesses.
Companies regulated by the Financial Services Authority (FSA) will, however, be additionally affected by the FSA's treatment of bribery. The FSA has shown by its past reports on financial crime processes in authorized firms that it wants to have a say in how companies comply not only with their anti-money laundering obligations (in relation to which it has an express role) but also their sanctions and bribery and corruption obligations.
Companies’ anti-bribery projects should be well under way by now. Anyone waiting for the Guidance before starting projects has no further excuse. The Guidance is high level and so general that it is unlikely to change significantly in its final version. Guidance from elsewhere, such as the detailed Transparency International Guidance, has been around for far longer and is potentially more useful to companies. Companies should not expect any grace period. Getting procedures in place and training carried out will take time, and companies must ensure they are ready for April 2011.