Minister for Justice unveils draft Scheme of Criminal Justice (Corruption) Bill, which includes proposals in relation to corporate criminal liability for corrupt acts by company directors, managers, officers, employees, subsidiaries or agents.
The Minister for Justice, Alan Shatter TD, has published details of proposed comprehensive new legislation on bribery and corruption. Of most relevance from a corporate governance point of view is the inclusion of provisions which will render companies criminally liable for corrupt acts committed by their directors, managers, officers, employees, subsidiaries or agents, where the corruption was intended to obtain or retain business for the company. The only defence available to a company in this scenario will be to show that it took all "reasonable steps" and exercised all "due diligence" to prevent the corruption taking place.
If the legislation is introduced in its current proposed form, it will have a dramatic impact on the corporate governance landscape for commercial entities operating in Ireland, which will, in effect, be mandated by law to ensure that they have appropriate supervisions and controls in place to ensure that they do not facilitate the commission of bribery or other corrupt activities by their employees or other business associates.
The risk for a company of not having appropriate anti-bribery and anti-corruption measures in place will be a potential criminal sanction, if the company’s directors, managers, officers, employees, subsidiaries or agents engage in corrupt practices on its behalf.
Meaning of "reasonable steps" and "due diligence"
What will constitute "reasonable steps" or appropriate "due diligence" measures remains to be seen (the Draft Scheme of the Bill provides no detail on this), but it seems likely that the Irish legislature will have regard to guidance issued by its UK counterpart.
Section 7 of the recently enacted UK Bribery Act, 2010 created a "corporate offence" similar to that unveiled in Minister Shatter’s Draft Scheme, which renders "relevant commercial organisations" criminally liable for failing to prevent "persons associated" with them from bribing others, with the intention of obtaining or retaining business or a business advantage for the commercial organisation.
The definition of "relevant commercial organisation" includes companies and partnerships which are "carrying on business in the UK", regardless of where they are incorporated or registered. The definition of "associated persons" is also broad; it includes persons who perform services on behalf of a company, regardless of the capacity in which they do so.
The Section 7 offence is a strict liability one, subject only to the defence that the relevant commercial organisation had in place "adequate procedures" designed to prevent bribery.
The UK's Six Guiding Principles
On 30 March 2011, the UK Government published its guidance on what constitutes "adequate procedures" in terms of preventing bribery and corruption.
The theme which is threaded through the UK guidance is that what is required will vary from organisation to organisation, and that combating the risks of bribery is largely about common sense, not burdensome procedures. Overall, a risk based approach is endorsed.
The guidance outlines six guiding principles to be followed by organisations in drawing up their own version of procedures required to prevent bribery and corruption, which are summarised as follows:
- Proportionate procedures – the guidance acknowledges that the level of risk organisations face will vary by reference to the type and nature of persons associated with it;
- Top-level commitment – it is incumbent on management to foster a culture in their organisation that bribery is never acceptable;
- Risk assessment – an organisation’s approach to preventing bribery should be risk based. In terms of categorising the types of risk which may arise, these can be broken into country risks; sectoral risks; transactional risks; business opportunity risks; business partnership risks;
- Due diligence – the level of due diligence required for certain transactions will be greater than others, and this should be reflected in an organisation’s anti-bribery and anti-corruption policy;
- Communication and training – an important part of having adequate procedures in place is to enhance awareness and understanding of the organisation’s anti-bribery prevention policies and procedures. In this regard, an organisation should consider communicating its bribery prevention policies externally, to the persons and companies with whom it does business;
- Monitoring and review – implementing adequate procedures should not simply be seen as a box ticking exercise; the effectiveness of bribery prevention procedures should be monitored and evaluated and procedures should be adapted where necessary.
Consequences for senior management personnel
In addition to the proposed introduction of a form of strict corporate criminal liability, the Draft Scheme of the Bill also contains provisions which will render a company’s officers and senior personnel criminally liable if they are found to have consented to, or connived in, the commission of corruption offences by the company, or if they are found guilty of "wilful neglect" in relation to the commission of corruption offences by the company.
Wider Legislative Reform
The publication of the Draft Scheme of the Criminal Justice (Corruption) Bill follows the release earlier this year of the Final Report of the Tribunal of Inquiry into Certain Planning Matters, more commonly known as the "Mahon Tribunal". The Mahon Tribunal, which was commissioned to investigate, and make findings in relation to, allegations of planning corruption identified several elected public representatives who had sought or received "corrupt" donations, and many others who had abused political power and government authority.
In addition to making factual findings, the Tribunal also makes a number of recommendations in relation to the legal reforms required if Ireland is to effectively combat bribery and corruption in its Final Report. Notably, the Draft Scheme of the Bill proposes the implementation of a number of the Tribunal’s recommendations. Some of the key points to note are as follows:
A Single Statute
If enacted, the "Criminal Justice (Corruption) Bill" will repeal the Prevention of Corruption Acts, 1889-2010 (which comprise seven different statutes dating back to Victorian times) and will replace them with a single statute which is intended to simplify, modernise and clarify Irish law on bribery and corruption. This is certainly an improvement to be welcomed.
According to the Draft Scheme of the Bill, the new legislation will set out several new offences in relation to bribery and corruption. While it is proposed to retain many of the same concepts, the language which is proposed is simpler and more modern.
Notably, it is proposed to significantly extend the definition of the term "corruptly", to include the doing of any act or omission (a) in breach of duty; (b) without due impartiality; (c) without lawful authority; (d) in breach of a relevant code of ethics or discipline; (e) in pursuit of undue benefit; (f) in a deceitful, dishonest or misleading manner; or (g) with an improper purpose.
The new offences are summarised as follows:
Active corruption – involves corruptly offering, giving, attempting or agreeing to give any gift, consideration or advantage, as an inducement to, or reward for, or otherwise on account of, any person doing any act or making any omission in relation to his or her office, employment, position or business;
Passive corruption – involves corruptly accepting, or obtaining or agreeing to accept or attempting to obtain for oneself any gift, consideration or advantage as an inducement to, or reward for, or otherwise on account of any person doing any act or making any omission in relation to his or her office, employment, position or business;
Active and passive trading and influence – involves the giving and/or receipt of any gift, consideration or advantage in connection with inducing another person to exert improper influence over the acts or omissions of an Irish public official;
Corruption in office – relates to corrupt acts or the improper use of confidential information by Irish public officials, either acting alone, or in concert with other persons;
Bribery of a foreign public official – involves corruptly offering, giving, attempting or agreeing to give any gift, consideration or advantage to a person as an inducement to, or reward for, or otherwise on account of the foreign public official doing any act or making any omission in relation to his or her office, employment, position or business;
Making reckless payments – involves giving a gift, consideration or advantage knowing or being reckless as to whether it will be used to facilitate the commission of a bribery or corruption offence;
Using documents to deceive – involves the corrupt use of documents which are false or erroneous or defective in a material particular, in order to induce another person into doing some act, or making some omission or providing some service in relation to his or her office, employment, position or business;
Intimidation – involves corruptly threatening harm with the intention of influencing any person to do an act or make an omission in relation to his or her office, employment, position or business.
The range of sanctions proposed in the Draft Scheme of the Bill includes both fines and imprisonment. Summary conviction can result in a fine of up to €5,000, or imprisonment for up to 12 months in the case of all offences, or both, whereas conviction on indictment is punishable by a term of imprisonment of up to 10 years (or 5 years in case of the offence of "trading in influence") or a fine (no maximum is prescribed). It is proposed in the Draft Scheme of the Bill that where a company or individual is convicted on indictment, any gift, considerations or advantage given or received by it, or any property of an equivalent value, may be forfeited.
Where a public official is convicted on indictment in relation to an offence, other than the offence of "trading in influence", a Court may also make an order terminating his or her office, position or employment. It may also make an Order excluding the public official from seeking or holding any other office, position or employment as an Irish public official for a specified period not exceeding 10 years. According to the Draft Scheme of the Bill, these sanctions will only be applied where the Court considers them necessary "in the interest of maintaining or restoring public confidence in the public administration of the State, and where in the interests of justice to do so".
While the default position is that the Irish criminal law only extends to acts done in Ireland, the Draft Scheme of the Bill includes provisions criminalising corrupt acts committed outside Ireland by certain categories of person. Although this is already the case under the Prevention of Corruption Acts, it is proposed to extend the categories of persons to whom extraterritoriality applies; the extended list includes Irish citizens, Irish public officials, Irish companies, and persons who have had their principal residence in Ireland for the 12 months immediately preceding the commission of a corruption offence.
Making Prosecutions Easier: Evidential Burdens
Corruption can be notoriously difficult to investigate and prosecute, given that corrupt agreements and bargains are normally made in secret. To make the job of the prosecutor easier, the Draft Scheme of the Bill proposes extending the evidential presumptions which are available to prosecutors under the Prevention of Corruption Acts, with a view to making it easier to prove the new corruption offences. Where a presumption applies, it has the effect of putting an onus on the accused person to put forward proof in relation to the legitimacy of the impugned gift, consideration or advantage.
Need for Preparatory Steps
It is not yet clear when the proposed new legislation will be introduced, but in the meantime, the implementation of anti-bribery and anti-corruption procedures is something which should be given consideration at management level, as the enactment of the proposed new measures will dramatically change Ireland’s corporate compliance landscape.
Given the wide territorial reach of the UK Bribery Act and the US Foreign Corrupt Practices Act, organisations operating in these jurisdictions may already have measures in place which will be sufficient for Irish law purposes. However, for those who are not, the prudent approach is a proactive one, as prevention is certainly better than cure when it comes to bribery and corruption.