The global battle against commercial bribery has advanced dramatically with the passage of the UK Bribery Act 2010 (Bribery Act). Following recent criticism, authorities in the United Kingdom appear eager to demonst rate with the Br iber y Act that they are as serious about compliance as the United States has shown it is with the Foreign Corrupt Practices Act (FCPA). Any multinational company with operations in the United Kingdom or United States should examine closely its compliance policies and procedures in an effort to avoid being one of the Bribery Act’s earliest examples or the FCPA’s next catch.
The FCPA, enacted in the United States in 1977, generally prohibits “corrupt” payments to foreign officials for the purpose of obtaining or keeping business, including payments made by a company’s third-party agents in foreign countries. While such payments are generally exchanged outside the United States, US lawmakers have attempted to extend the FCPA’s reach as far as they can. The FCPA applies to US citizens, nationals and residents, as well as corporations that have securities registered in the United States or which make certain securities disclosures in the United States, and corporations and associations organised under a US state’s law or whose principal place of business is in the United States. It also encompasses the conduct of foreign subsidiaries or foreign agents of US companies where the US companies authorise, direct or control the activity.
In addition to its anti-bribery provisions, the FCPA contains accounting provisions that generally require companies with securities listed in the United States to keep books and records that reflect transactions accurately, and to maintain an adequate system of internal accounting controls. The accounting provisions are sometimes invoked where authorities face significant challenges in proving that someone actually paid a bribe, but where they have proof that the books are purposefully inaccurate.
The Anti-Bribery Convention
In an effort to enhance global cooperation in combating bribery, the Organisation for Economic Co-operation and Development’s (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention) came into force in 1997. The Anti-Bribery Convention requires its 38 signatory nations, including the United States and United Kingdom, to enact and enforce laws prohibiting international commercial bribery.
In October 2008, the OECD’s Working Group on Bribery issued a report stating it was “disappointed and seriously concerned” with the United Kingdom’s compl iance with the Ant i-Br iber y Convention. While the report noted that the United Kingdom had made some progress in combating bribery, the Working Group emphasi sed that it “strongly regrets the uncertainty about the UK’s commitment to establish an effective corporate liability regime” and urged the United Kingdom “to adopt appropriate legislation as a matter of high priority.”
UK Bribery Act 2010
The United Kingdom responded with aggressive legi slat ion that in many significant respects reaches further than the FCPA.
The Bribery Act provides criminal penalties against individuals and corporations for offering, making, or requesting or receiving a financial or other advantage in return for the improper performance of a public or private business activity. It also imposes criminal liability on corporations for failing to prevent such bribes, where the bribes are made or received by a person performing services for the corporation, including thirdparty agents. Notably, however, the Bribery Act provides that a company can avoid liability if it had in place “adequate procedures” designed to prevent individuals associated with the company from paying bribes.
While the UK Bribery Act does not contain separate accounting provisions, in many respects it imposes greater anti-bribery restrictions than the FCPA. It applies to any corporation doing business in the United Kingdom that pays a bribe overseas, even if the bribe does not otherwise involve activity in the United Kingdom. Additionally, the Bribery Act reaches bribes that are intended only to influence private actors as well as bribes to influence public officials. Moreover, the Bribery Act makes it a crime for a corporation to fail to prevent a bribe by a person performing services for the corporation, unless the company had in place adequate procedures designed to prevent bribes. Any adequate procedures defence is certainly going to be delicate however; a company relying on this defence to escape liability will have to explain why the adequate procedures failed to prevent a bribe.
The OECD has heaped praise on the United Kingdom for the Bribery Act, stating that the United Kingdom has sent “a strong message of its commitment to fight against bribery… The UK is now well placed to help lead this fight.”
If enforcement efforts are as strong as the Bribery Act’s terms, the United Kingdom will be playing a powerful role in fighting bribery and we will likely see significant activity affecting a broad range of companies soon after it comes into force (expected to be in October 2010). Similar to FCPA enforcement, those efforts are likely to focus on industries where contact with public officials, including officials of state-owned enterprises, is common. Key industries will likely include energy, defence, health care, pharmaceuticals and medical devices, telecommunications and real estate.
Any multinational company operating in the United States or United Kingdom would be wise to focus on anti-bribery policies, procedures, and training and deliver pointed communications from management condemning bribery.