The recent overhaul of the UK anti-bribery legislation and the continuing tightening up of the Irish legislation has put the spotlight on corporate anti-corruption procedures and practices.
Given the stringent penalties for non-compliance and recent developments in the Irish regime, it is an area that is increasingly becoming a focus of concern; particularly so in multi-jurisdictional business arrangements where there are likely to be gaps between the differing cross-border, anti-corruption requirements.
This article outlines the practical measures that Irish businesses should take to ensure compliance with anti-corruption requirements, set within the context of a brief overview of the Irish legislative framework, the impact of the UK Bribery Act 2010 on Irish businesses and other the recent developments in this area.
Practical Measures to Ensure Anti-Corruption Compliance
Specific ways in which Irish businesses should work towards complying with anti-corruption requirements include:
- Know the laws that apply to you. Understand the laws that apply to your business, particularly if your business is part of a larger group or companies or has multi -jurisdictional business interests.
- Anti-Corruption Policies and Procedures. Put clear and unambiguous written anti-corruption policies and procedures in place, implemented by top-level management and communicated fully throughout the organisation (ideally by way of appropriate induction and training for directors, managers, and employees to ensure they understand the full extent of the anti-corruption programme and the sanctions for violation). Communicate anti-corruption policies and requirements externally to legal entities with which the organisation does business. The approach in developing and putting in place such policies and procedures should be risk based and proportionate to the level of risk associated with the type, nature and size of the business. The emphasis should be on continued monitoring and review to ensure that policies and procedures are adaptable to changing levels of risk.
- Employment Policies and Handbooks. You should have effective internal mechanisms in place to investigate whistleblowing complaints (see below, Recent Developments). Employment contracts should expressly state penalties relating to corruption, and should require employees to be familiar with the relevant bribery and corruption laws, their roles in the business, their responsibilities and the appropriate response to any suspicion of corrupt activity. Employment contracts and handbooks should detail the appropriate channels for whistleblowing in a safe and confidential manner.
- Contractual Provisions. Your contractual arrangements should contain full and accurate anti-corruption provisions, to ensure compliance with the differing requirements of the applicable anti-corruption regimes. This is particularly so in corporate transactions, where there is an increasing focus on having appropriate anti-corruption disclosures and related warranties.
- Due Diligence. Irish businesses that contract with non-Irish third parties should conduct due diligence to ensure that such third parties are compliant with the highest standards of anti-corruption requirements; otherwise the Irish business could be exposed to liability for the shortfall in their trading partner's anti-corruption policies.
An Overview of the Irish Anti-Corruption Legislative Framework
The Irish anti-bribery framework is a complex system of case law and interconnected statutes contained in the Prevention of Corruption Acts 1889 to 2010, the Public Bodies Corrupt Practices Act 1889, the Ethics in Public Office Act 1995 and the Proceeds of Crime (Amendment) Act 2005. In light of the fragmented nature of Irish law in this area, and the weaknesses in the legislation which have resulted in difficulties in securing prosecutions, the Organisation for Economic Co-Operation and Development (OECD) Anti-Bribery Group has recommended that there is a need to extend Irish anti-corruption laws to mirror the overhaul of the UK anti-bribery framework (see Recent Developments).
Impact of the UK Bribery Act 2010 (the “2010 Act”) on Irish Businesses
The 2010 Act has created a comprehensive regime with extensive extra-territorial reach, having a wide impact on commercial organisations carrying on business, or part of a business, in the UK. This is the case even when the company is not incorporated or registered in the UK. Most notably the 2010 Act impacts upon Irish businesses that supply into the UK, or have subsidiaries based in the UK. As penalties under the 2010 Act include imprisonment for up to ten years, unlimited fines and (potential) permanent exclusion from government contracts across the EU, Irish commercial organisations which do business in the UK (or which partner with UK businesses) should seriously consider the 2010 Act and put in place suitable bribery prevention procedures (see Practical Measures to Ensure Anti-Corruption Compliance).
It is worth noting that the key change brought in by the 2010 Act was the introduction of a new corporate offence providing that a commercial organisation will be guilty of an offence if a person associated with it bribes another person. Broadly speaking, a commercial organisation will be criminally liable for failure to prevent bribes paid on its behalf. This strict liability offence does not require evidence that the commercial organisation was aware of or responsible for the bribery. The only defence available is where the commercial organisation can show that it had “adequate procedures” designed to prevent persons associated with it from committing bribery. The UK government has published risk-centred guidance as to what constitutes “adequate procedures”, available at http://www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf.
Recent developments in the Irish legislative framework reflect a clear move towards a more comprehensive and robust anti-corruption regime:
Criminal Justice (Corruption) Bill 2012 (the "Corruption Bill"). The draft scheme of this Bill was approved by the Government in summer 2012 (as yet, there is no formal indication as to publication timeframe). The draft Corruption Bill introduces updates to existing offences and adds new related offences and penalties. Importantly, Irish businesses will be required to take “all reasonable steps” and exercise “all due diligence” to prevent bribery and corrupt practices; that is, corrupt practices by employees and agents of the business will be automatically imputed to the business. The only defence available will be to show that the business took “all reasonable steps” and exercised “all due diligence” to avoid the commission of the offence. There is no guidance as to what constitutes “all reasonable steps” or “all due diligence”, though it appears likely that the Irish legislature will follow the “adequate procedure” guidance issued by the UK Ministry of Justice.
The key message for Irish businesses is to put in place anti-corruption policies and procedures as soon as possible so as to avail of this limited defence (see Practical Measures to Ensure Anti-Corruption Compliance).
Protected Disclosures in Public Interest Bill 2012 (the “Whistleblowing Bill”). The draft Whistleblowing Bill is expected to be published by the Government in upcoming legislative programme (summer 2013). The draft Whistleblowing Bill introduces a consolidated, overarching framework protecting whistleblowers across all sectors of the economy and provides for a robust disclosure regime in which a number of distinct internal, external and regulatory disclosure channels are available through which a worker can make protected disclosures. It is intended to safeguard workers who have made protected disclosures from being subject to adverse effects at work, and will provide workers with certain significant remedies for workers who do suffer detriment as a consequence of having made a protected disclosure.
The key message for Irish businesses is to put in place effective internal mechanisms to investigate whistleblowing complaints (see Practical Measures to Ensure Anti-Corruption Compliance).
Foreign Account Tax Compliance Act ("FATCA"), January 2013. The US Treasury and Inland Revenue Services have introduced FATCA to prevent US taxpayers who hold financial assets in non-US financial institutions (and other offshore vehicles) from avoiding their US tax obligations. FATCA will operate as a framework for a multi-jurisdictional information reporting regime to improve international tax compliance, the same to be implemented in each jurisdiction via specific Inter-Governmental Agreements (IGAs) (by way of example, the UK and US IGA came into force in September 2012; the Irish and US IGA came into force in December 2012). Amongst other requirements, the Irish IGA provides for automatic reporting and exchange of information in relation to accounts held in Irish financial institutions by US persons and the reciprocal exchange of information regarding US financial accounts held by Irish residents.
The key message for Irish businesses (to whom FACTA applies) is to consider the need to incorporate information exchange and reporting requirements in their anti-corruption policies and procedures, employment policies and contractual arrangements as appropriate (see Practical Measures to Ensure Anti-Corruption Compliance).