The Bribery Act 2010 ("the Act") came into force on July 1st, 2011. The Act provides a new codified anti-bribery and anti-corruption regime which may create both civil and criminal law liability for individuals with a connection to the UK, either in their own right or as partners of a business or officers of a UK or foreign company.
In several respects, the Act goes considerably further than its US equivalent, the Foreign Corrupt Practices Act ("FCPA") and related US legislation.
The memorandum addresses the practical impact of the Act and related UK legislation on individuals.
It must be recognised, however, that acts amounting to bribery or corruption may create liability in more than one jurisdiction.
The specific offences relating to bribery of third parties under the Act are:
Section 1: Offence of Bribing Another Person
A person ("P") is guilty of an offence where:
- P offers, promises or gives a financial or other advantage to another person; and
P intends the advantage
- to induce a person to perform improperly a relevant function or activity; or
- to reward a person for the improper performance of such a function or activity; or
- P knows or believes that the acceptance of the advantage would itself constitute the improper performance of a relevant function or activity.
Direct or indirect payments are caught and the offence applies equally to public and private persons.
A relevant function or activity, for the purpose of the Act includes:
- any function of a public nature;
- any activity connected with a business;
- any activity performed in the course of a firm's employment; or
- any activity performed by or on behalf of a body of persons (whether incorporated or not).
The relevant function or activity must satisfy one of the following conditions to be caught by the Act, namely that the person performing the function or activity is:
- expected to perform it in good faith; or
- expected to perform it impartially; or
- is in a position of trust by virtue of performing it.
The Act applies even where the relevant function or activity:
- has no connection with the UK; or
- is performed in a country outside the United Kingdom.
The Act therefore creates an absolute prohibition on improper payment by anyone subject to the Act's jurisdiction to any person (which includes a company or other entity), whether in the private or public sector, anywhere in the world.
The function or activity will be deemed to be performed improperly if it is performed in breach of "relevant expectation". The test for overseas or UK is the same – what a reasonable person would expect in the UK, not in the foreign country. Local customs are to be disregarded unless the payment is permitted or required by the written law of the country in question – being in legislation or a written and published judicial decision.
Section 6: Bribery of Foreign Officials
This includes any direct or indirect payments to a foreign public official with the intention of obtaining or retaining business or an advantage in the conduct of business (including any trade or profession) if the intention is to influence a foreign official – including to secure any omission to exercise his or her functions or any use of the official's position as such, even if the act or omission sought is not within the official's authority. "Foreign public official" includes anyone holding a legislative, administrative or judicial position of any kind, whether elected or appointed, of any country outside the UK or any subdivision thereof or any public agency or enterprise of that country or is an official of a public international organisation.
The latter includes any organisation where members are countries or territories, governments, other public international organizations or any mixture of the above.
Unlike Section 1, Section 6 does not require proof that an act would be an "improper performance" of a public duty or even that the person intended to induce an improper performance.
Unlike the FCPA, being an official of a political party, on its own, is not caught by the Act.
The above offences will apply and there is no defence to them if they are proven to occur, unlike the Section 7 offence.
Section 7: Failure of a Commercial Organisation to Prevent Bribery
Section 7 makes any UK business or any foreign business which conducts any business in the UK ("relevant commercial organization") liable if an "associated person" bribes another person (public or private) in the course of its business. It is an absolute offence, but it carries an absolute defence – that the organization put in place adequate procedures to prevent this and the offence occurred without the organisation's knowledge or acquiescence, notwithstanding existence of these procedures. The fact that the organization did not know of the actions of the associated person will be no defence if the organization has not put in place adequate procedures.
An "associated person" is any person providing or performing services on the Company's behalf – be it an employee, an agent, a contractor, supplier or any other person.
The reference to an employee needs to be qualified. If the bribe is authorised, made or acquiesced in by a director or manager who is the "directing mind or will" of the company, the act will be attributed directly to the company and fall within Section 1, not Section 7. The Section 7 procedures discussed below will, therefore, provide no defence to the company. For Section 7 to be triggered, the associated person must have done something which, if done in the UK, would be an offence under Section 1 or Section 6 of the Act.
Section 2: Accepting a Bribe
Under Section 2 there is an additional offence for a person to accept a bribe. This is the reciprocal of the Section 1 offence described above and applies the same defined terms.
A person (R) is guilty of this offence if:
R requests, agrees to receive or accepts directly or indirectly a financial or other advantage for R or another benefit:
- intending that, as a consequence, a relevant function or activity should be performed improperly (whether by R or another person); or
- when the request, agreement or acceptance itself constitutes the improper performance by R of a relevant function or activity; or
- as a reward for the improper performance (whether by R or another person) of a relevant function or activity; or
- In anticipation of or in consequence of R requesting, agreeing or accepting a financial or other advantage, a relevant function or activity is performed improperly by R or any other person at R's request or with R's assent or acquiescence.
It does not matter whether or not R or the beneficiary believed the performance of the function or activity to be improper.
The offence relates to private and public office holders and employees in the UK. It also applies where an individual is employed overseas, if that person has a close connection with the UK – see above.
What is an Individual's Liability for the Offences?
An individual will be liable under the Act, whatever his or her residence or nationality, if he or she performs or knows about or connives in any act or omission which forms part of an offence under the Act in the UK. Obviously if the person or official being bribed is in the UK, the Act will apply. However, it will also apply to bribing outside the UK if, for example, a decision to commit the offence is made in the UK, the subject of emails with an address in the UK, if a UK bank account is used or any benefit provided in the UK.
An individual (wherever resident and of whatever nationality) will also be liable for any act of a UK company or Scottish partnership (which has a separate judicial personality, unlike an English partnership) of which he or she is a director, manager, secretary or other similar official of a body corporate (or partner of a Scottish partnership) ("Senior Officer") if committed with his or her consent or connivance. This applies to bribery in the UK or abroad.
An individual who has a close connection to the UK will also be liable for any offence committed by a foreign company overseas, if committed with his or her consent or connivance. A close connection means:
- a British citizen;
- a British Overseas Territory citizen;
- a British national (overseas);
- a British Overseas citizen;
- a person who under the British Nationality Act 1981 was a British Subject;
- a British Protected Person as defined in that Act;
- an individual ordinarily resident in the UK.
The liability applies equally to the offences of bribery or being bribed.
Advisers and consultants may be liable if involved in any corrupt payment scheme. Under the Money Laundering Regulations and Guidance Notes for Solicitors, a solicitor (like an Accountant or other professional) aware of an offence may be under a duty to report the person.
What are the Penalties?
Under the Act, an individual is liable to a fine and/or imprisonment. The term of imprisonment is up to 12 months on summary conviction (minor offences) and up to 10 years on indictment. A fine is likely to be calculated by reference to the benefit obtained, even if not full "disgorgement of profits" which has been the feature of recent US prosecutions. However, Bribery is now a crime and the benefits obtained are therefore proceeds of crime and therefore liable to forfeiture under the money laundering laws. Richard Alderman, head of the Serious Fraud Office has publicly signaled an intent to use all available laws to recover the proceeds of crime. Additional penalties potentially include:
- Loss of any concession, licence or contract obtained as a result of corruption.
- Disqualification from public works under the EU public procurement and various national procurement rules.
- Exposure to other anti-corruption laws (including the US, if a company has shares listed there) and the local laws of the jurisdiction.
- Exposure of individuals to risk of extradition. The UK currently has extradition treaties with over 100 countries. In the case of the so-called "Category 2" countries, no prima facie evidence is required in support of an application for extradition.
- Potential civil claims by competitors who lost out as a result of the corrupt act, class actions and shareholder actions – particularly in the US.
- Reputational loss.
A person committing an offence as an individual or acting as a Senior Officer may face civil or criminal prosecution. In the case of a Senior Officer who carried out or knew of an offence, criminal prosecution is most likely, both of the company and the Senior Officer.
The SFO has published guidelines stating:
"Corporates may also want to know about criminal investigations of individuals. There are no guarantees here. We would assess the position of individuals on their merits. Examples of the questions we would ask are:
- how involved were the individuals in the corruption (whether actively or through failure of oversight)?
- what action has the company taken?
- did the individuals benefit financially and, if so, do they still enjoy the benefit?
- if they are professionals should we be working the with appropriate Disciplinary Bodies?
- should we be looking for Directors' Disqualification Orders?
- should we think about a Serious Crime Prevention Order?
The interaction between the corporate investigation and any investigation of individuals gives rise to may issues. There are potentially many different sets of proceedings whether in the UK or elsewhere. We can discuss these issues with the corporate and its advisers so far as it is appropriate for us to do so."
Under English law, a director or officer cannot be indemnified by the company, unless a prosecution is successfully defended.
In addition, an individual office may face a civil suit from shareholders of the company as well as a termination of any contact of employment or office.
The Approach of the UK Prosecutors
Under current arrangements, action will normally be initiated by the Serious Fraud Office. The SFO has the ability to pursue either a civil suite of remedies and/or a criminal suite.
The SFO's stated policy is to encourage self-reporting by companies. If a company self-reports, co-operates and is found, on investigation, to have a serious anti-corruption ethos, in respect of which the event was an aberration and no Senior Officer is involved, the SFO may well pursue a civil remedy aimed at disgorging the benefits of the corrupt act.
If, on the other hand, the offender has been negligent in putting in place procedures or is considered to be tolerant of corruption, a criminal prosecution is likely. The SFO has stated that it will use a wide range of intelligence gathering techniques – reports from embassies and local media, whistleblowers, sting operations and the full panoply of white collar crime surveillance techniques to catch offenders. The richest source of intelligence is likely to be from whistleblowers within companies who suspect that company is acting corruptly.
In the case of individuals a degree of "plea bargaining" in criminal prosecution may be involved if there is full cooperation. However, ultimate sentencing will be the prerogative of the judge and custodial sentence will be normal.
Any prosecution requires the personal approval of the head of the prosecuting agency. This is so that the agency can focus on cases which first have a good chance of success and secondly are in the national interest.
Facilitiation Payments – Are they a bribe?
The UK law does not allow for the making of so-called facilitation payments, which are currently permitted under the FCPA. These are small payments made to officials to get them to do what they have to do – not to influence them to use their discretion, which is an offence in the US, just as much as in the UK.
Facilitation payments are not permitted in the UK and any payment will be seen as an offence. Overseas, the official UK line is that if a facilitation payment is demanded, it should be resisted and reported to the local UK embassy so that pressure can be brought, if necessary, on behalf of all affected businesses.
This is likely to be one of the most vexed areas of risk because, in many countries, it is impossible to clear customs, get licences etc. without making such payments.
It is to be hoped that the authorities will act reasonably and determine that it is not in the national interest to prosecute for small facilitation payments which are generally unavoidable. However, no assurance can be given and the SFO is publicly taking a very strong line.
Corporate Entertainment and Hospitality – Is it a bribe?
One of the major concerns (and one of the main reasons for the delay in introducing the Act) has been concern that corporate hospitality, extended to private or public counterparties, would be treated as a bribe. To a degree this has been clarified by guidelines issued by the Ministry of Justice. The motive is the key. The more lavish the hospitality or the higher the expenditure, the more suspect it will be. There is an official encouragement for industry-wide bodies to develop their own guidelines on what is and what is not appropriate. The guidelines give case studies, but only for illustrative purposes. The regulations of the recipient's own organisation will also be relevant.
An individual who is exposed should familiarise himself or herself with the Ministry of Justice guidelines, http://www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf particularly on what is or is not likely to be considered a bribe.