Bribery is costly. Companies in the UK and abroad have paid huge financial penalties for being involved in it in recent years; even if they have escaped prosecution.
The Bribery Act 2010 sets out the modern criminal law on bribery. Prosecutions can still be brought under old legislation for offences committed before the Bribery Act came into effect on 1 July 2011. However, such prosecutions are naturally becoming increasingly rare. In this article, we consider the 2010 Act and what it means in practice for companies and individuals within companies.
Of course companies, and those working for companies, must ensure that their working practices are lawful. But with the 2010 Act there is the need for more than just being vaguely aware that it is not OK to bribe to get business – or receive bribes to award business. For a start, there is the scope of the 2010 Act, which applies to acts committed overseas – the act will be caught by the Act if the business, or any part of it, is in the UK.
Sections 1 and 2 of the Act create the basic offences of bribing and being bribed.
Section 1 makes it an offence for a person to ‘offer, promise or give a financial or other advantage to another person in one of two cases:
- Case 1 applies where P intends the advantage to bring about the improper performance by another person of a relevant function or activity or to reward such improper performance.
- Case 2 applies where P knows or believes that the acceptance of the advantage offered, promised or given in itself constitutes the improper performance of a relevant function or activity.’
Section 2 provides that a person (“R”) is guilty of being bribed in 4 cases:
- Case 3 is where R requests, agrees to receive or accepts a financial or other advantage intending that, in consequence, a relevant function or activity should be performed improperly (whether by R or another person).
- Case 4 is where—
(a) R requests, agrees to receive or accepts a financial or other advantage, and
(b) the request, agreement or acceptance itself constitutes the improper performance by R of a relevant function or activity.
- Case 5 is where R requests, agrees to receive or accepts a financial or other advantage as a reward for the improper performance (whether by R or another person) of a relevant function or activity.
- Case 6 is where, in anticipation of or in consequence of R requesting, agreeing to receive or accepting a financial or other advantage, a relevant function or activity is performed improperly—
(a) by R, or
(b) by another person at R's request or with R's assent or acquiescence.
‘Improper performance’ is defined at s 3, 4 and 5. It means performance which amounts to a breach of an expectation that a person will act in good faith, impartially, or in accordance with a position of trust.
Sections 3 and 4 of the Act define ‘relevant function or activity’ and are themselves supplemented by s 5, which further defines the ‘expectation test’ used in those provisions. These provisions apply ‘threshold’ and ‘wrongfulness’ tests. The provisions are designed to ensure that personal/family arrangements etc are kept outside the ambit of the law and to distinguish improper bribery, on the one hand, from legitimate rewards or inducements on the other.
The two basic offences are supplemented by s6, which creates the offence of bribing a foreign public official.
But for directors and general counsel, it is s7 that creates the most concern. Under s7, any commercial organisation may incur criminal liability if a person who performs services for it (such as an agent or employee) commits bribery on its behalf and it cannot prove that it had adopted “adequate procedures” to prevent such conduct.
The Ministry of Justice published a guide on compliance with the Act; including six principles of adequate procedures to prevent bribery:
- Proportionate procedures – the procedures adopted should be proportionate to the risk faced.
- Top-level commitment – the company should be committed to preventing bribery through a commitment by senior management.
- Risk assessment – the company should assess the nature and extent of its exposure to potential bribery – such assessments should be periodic, informed and documented.
- Due diligence – the company should take a risk based approach, taking appropriate care when entering into relationships or markets that carry a risk of bribery.
- Communication – the company needs to ensure that its anti-bribery policy is embedded and well-understood throughout the organization. There should be provision for employees to ‘speak up’.
- Monitoring and review – the procedures put in place should be reviewed and updated as the company’s risks change over time.
If you get it wrong you risk prison. Your business risks unlimited fines, blacklisting from EU contracts and the forfeiture of the value of illegal deals under related proceeds of crime and money laundering laws.
The SFO, however, is keen to encourage businesses to self-report and potentially avoid the most draconian consequences. This decision should only be made after weighing up the position very carefully and taking specific legal advice.
Section 11 provides that an individual guilty of an offence under sections 1, 2 or 6 can receive up to 10 years imprisonment. A corporate body can receive an unlimited fine.
The Act is far-reaching and not only punishes the bribery – it also punishes failure to have prevented that bribery. It places huge obligations on corporates and, most notably, their legal consultants or in-house counsel.
The task of determining whether a company is, or has been, involved in bribery can seem colossal for general counsel; who are already saddled with many responsibilities. But turning a blind eye to bribery or hoping for the best is not an option. If a company believes or suspects that it could, in the future, face questions about past or current activity that could be interpreted as bribery, it has to act immediately.
There is the defence for businesses that have the aforementioned adequate procedures to prevent bribery. Companies who put in place adequate procedures will have an absolute defence to liability under the Act. Similarly, broadly speaking, because of the way the statute works senior officers of organisations that have put in place adequate procedures to prevent bribery will be shielded from successful prosecution; unless they are themselves implicated in the corrupt behaviour.
If you are putting together your adequate procedures, it is worth seeking specialist legal expertise to ensure what you are proposing to put in place meets the standard.
The first thing a company must do if bribery is suspected is investigate. Anyone conducting such an internal investigation of the company will need to be able to follow the evidence trail as well as determine whether bribery has been committed and, if so, by whom. This is really self-preservation: if there is a hint of corruption then, if the case ends up on a prosecutor’s desk he/she will look to see how the company reacted when suspicions came to light.
General counsel can provide valuable input to an internal investigation. He or she will know the working practices of the company and understand the finer forensic points that employees or directors might miss. Legal assistance brought in from outside can also bring with it both the knowledge of this area of law and expertise regarding how best to proceed if bribery is discovered. Clearly, it also sends a signal that the company is serious about dealing with any issue there may be.
An expert in this area can analyse the preventative measures a company had in place: how robust were they? Were they regularly maintained and reviewed? Who was responsible for them? Did they fail to prevent bribery, if so how? Much will be down to training and records.
A company that conducts an internal investigation can self-report any bribery to the authorities before they are aware of it. Doing this and then co-operating fully with the authorities can lead to more lenient treatment than if the authorities had found the bribery themselves. Initially there will be the painful period of formal interviews and investigators seizing files and perhaps even speaking to clients’ working hand-in-hand with the investigator can usually help to minimise the worse aspects of a formal criminal investigation with all the disruption and potential reputational damage that involves.
Once again the most valuable card a company can hold in its hand in this situation is experience - experience of dealing with the powers that be. As an example, the SFO could offer a company a Deferred Prosecution Agreement (DPA), whereby a prosecution is suspended on the condition that the company agrees to meet a number terms, such as fines, compensation orders or improvements to working practices.
Such an outcome would be far better than the company being prosecuted. But securing such an outcome requires not just the right approach to the internal and SFO investigation but also sheer hard work. It will never be enough just to confess and say ‘sorry’. A DPA would only ever be considered if there was a real detailed examination of how the offence happened and what steps have been taken to remedy it. That is part of the value of external lawyers coming in before the authorities do. It can be more straightforward for an external lawyer to recommend that a director gets sacked than it would be for an in-house lawyer.
Any hint of bribery in a company has to be investigated immediately and appropriate action taken. The important thing is to identify and follow the most appropriate course of action.