Company A and B are seeking to win a contract from company C. Company A pays a bribe to win the contract. Does company B have a remedy against company A in English law? There appear to be no decided cases in English law on this issue, but this article considers whether such claims might be possible.
Potential causes of actions
Possible causes of action include:
- a claim for unlawful means conspiracy;
- (where a formal tender process is adopted) a claim for wrongfully procuring a breach of an implied contractual term confirming tenders will be considered honestly, impartially and on their merits;
- (where a formal tender process is adopted) a contractual claim for breach of an implied agreement between A and B that each would tender on an honest basis;
- a statutory damages claim before the Competition Appeal Tribunal (CAT) for infringement of either the Chapter I or Chapter II prohibition of the Competition Act 1998 or Article 101 of the Treaty on the Functioning of the European Union (TFEU) (only possible after the Office of Fair Trading (OFT) or European Commission has made a decision that a relevant provision has been infringed);
- a claim for breach of statutory duty arising from infringement of the Competition Act 1998 or Article 101 of TFEU, in the absence of a decision of one of the authorities listed above.
Of these, unlawful means conspiracy may prove to be the preferred route, although much will depend on the facts of the particular case.
Unlawful means conspiracy
Unlawful means conspiracy requires injury to the claimant as a result of an unlawful act or acts where two or more people have combined to cause the injury. The elements of a successful claim are:
- an agreement (formal or informal) between two or more individuals or entities to use unlawful means to achieve a particular purpose;
- the carrying out of that agreement;
- an intention to injure the claimant in doing so; and
- loss to the claimant.
There should be no legal difficulty in satisfying the requirement to establish an agreement or loss, providing this can be done on the facts of the case.
Proving an intention to injure the claimant is more problematic. It could be argued that the defendant's intention in paying a bribe was to enrich itself, not injure its competitor. In Lonrho plc v Fayed it was held that where it is foreseeable that the defendant's actions could cause damage to the claimant, but there is no intent to injure, a claim will fail. However, and critically, it was also stated that it is not a defence for the defendant to show that its primary purpose was to further or protect its own interests.
Kuwait Oil Tanker Co. SAK v Al Bader is one of the leading cases on unlawful means conspiracy. It involved a conspiracy to misappropriate the claimants' assets. Here, the Court of Appeal decided that intention to injure the claimant did not have to be the defendants' predominant purpose or intention and was something that could be inferred from the facts. In many cases, it was said, it will be clear from the acts of the conspirators that they must have intended to injure the claimant, adding that "in the case of a conspiracy to defraud by wholesale misappropriation it would be absurd to argue that the conspirators did not intend just that". The Court concluded that the Defendants' principal purpose was no doubt to line their own pockets, but they cannot be heard when doing so to say that they did not intend to injure the Claimants or that their acts were not aimed at the Claimants.
In Grupo Torras v Al Sabbah Mr Justice Mance went further, stating that it may be enough to show that it was reasonably foreseeable that the claimant would suffer loss as a result of the act which the defendants were conspiring to carry out: "if it suffices that a conspiracy is aimed or directed at the plaintiff, in circumstances where it can only be said that it can be reasonably foreseen that it may injure him, then rigorous insistence on a need for specific intent to injure the particular plaintiff seems unjustified".
The issue was again considered at the end of 2012 in Novoship (UK) Limited and others v. Vladimir Mikhaylyuk and Others. Here, Novoship asserted that a former employee had solicited and received bribes when awarding ship charters and had conspired with others to do so. In summarising the law, Mr Justice Clarke in Novoship noted the principle that whilst the claimant must establish an intention to injure this need not be the defendants’ predominant purpose and that it is no defence for the defendant to show that their primary purpose was to further their own interests.
Mr Justice Clarke also remarked that “the English Courts have steadfastly set their face against bribery and corruption, whose prevalence in cases coming before this Court shows no sign of reducing, and have, for that purpose, fashioned draconian remedies whose intended effect is to deprive those who are party to bribery, whether as briber or beneficiary of the bribe, of any profit from transactions which its taint pollutes, which may not be limited to the transaction in respect of which the bribe was given in the first place.” This emphasises the desire of the English Courts to use the law to prevent the perpetrators of fraud to profit from their own wrongdoing.
The theft of assets, perhaps, causes more direct injury to a claimant than it suffers from bribes paid by its competitor to win a contract. But the injury remains obvious, the bribe is paid in part so that the bids of others will be discounted, and in both examples, the predominant purpose of the wrongdoer is self-enrichment. The case-law described above provides forceful arguments to support the argument that bribing competitors have the necessary intention to injure.
Procuring a breach of contract – formal tender process
Where an invitation to tender for a contract prescribes a "clear, orderly and familiar" bidding procedure, it is likely that there is an implied contract between the potential customer and each person delivering a conforming tender that the tender will be considered honestly, impartially and on its merits: Blackpool & Fylde Aero Club v Blackpool Borough Council  1 WLR 1195 (CA). In that case, it was held that the invitee has a duty to give due consideration to all tenders that are received within the stated deadline.
That implied contract would be breached if a representative of the potential customer is bribed to award the contract to a competing tenderer, or to ensure that an honest tenderer is excluded from consideration. It should therefore follow that the bribing competitor will be liable in tort to other bidders for wrongfully procuring the breach of contract. The bribing competitor should be assumed to have known of the implied contract breached by the acceptance of the bribe.
It is possible that use could be made of this doctrine in informal bidding processes, provided that the necessary contract can be implied between the customer and the unsuccessful bidder, and provided that the bribing competitor is aware of the existence of that contract.
Further support for the implied term principle might also be found in the EU public procurement rules that debar a company from participating in or being awarded a public contract if that company has been convicted of offering or giving a bribe. Arguably the existence of public procurement rules may even provide a contractual claim (express or implied) as against the public body if it has awarded a contract as a result of receiving bribes from the winning tenderer. And, in any event, the rules provide a mechanism for claiming compensation from the public body, together with the means to have the contract award set aside.
Breach of the contract between tenderers – formal tender process
It has also been suggested that there is an implied contract between bidders participating in a formal process that each would tender on a honest basis. Payment of a bribe would, if that were right, be an actionable breach of contract.
Breach of Competition law
Article 101 of TFEU prohibits "all agreements between undertakings, decisions between associations and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market". All agreements or decisions prohibited by Article 101 are automatically void.
The payment of a bribe to secure a contract could potentially constitute an agreement or concerted practice which has as its object or effect the prevention, restriction or distortion of competition, and so would infringe Article 101 if it affected trade between Member States and competition within the EU.
The Competition Act mirrors the wording of Article 101 of the Treaty but applies it in the UK context. Section 2(1) of the Act (the 'Chapter I prohibition') prohibits "agreements between undertakings, decisions between associations of undertakings or concerted practices which may affect trade within the United Kingdom and have as their object or effect the prevention or distortion of competition within the United Kingdom".
Section 47A of the Competition Act creates a right to bring a monetary claim for damages for breach of the competition provisions of the Treaty and/or Act before the Competition Appeal Tribunal (CAT). A claim may not, however, be brought in this manner until the CAT, Office of Fair Trading or European Commission has made a decision that one of the competition provisions has been infringed and appeals against the decision have been determined or the period within which an appeal may be brought has expired.
A party losing a contract to a bribing competitor would therefore be able to bring a claim before the CAT for damages arising from an infringement under the Act or Treaty only once the arrangement for the payment of the bribe had been ruled to infringe the relevant provisions.
It is well-established that a private claim can be brought for a breach of Article 101. This was the view of the European Courts of Justice in Courage Ltd v Crehan and is the basis for a number of current proceedings before the High Court.
A party losing a contract to a bribing competitor is therefore able to bring a claim in the High Court under Article 101, where the bribe affected trade between Member States and competition within the EU. The burden would be on the claimant to prove, to the requisite standard, that the conduct took place and that it amounted to an infringement of competition law.
Under s 47A(10) of the Competition Act 1998, the right to make a claim before the CAT "does not affect the right to bring any other proceedings in respect of the claim". Although the right to bring a damages claim for harm arising from an infringement of the Competition Act, as a breach of statutory duty, is not expressly set out in the Act, it is now generally accepted that a claimant may bring a damages claim, or indeed a claim for other forms of relief, in the High Court, in exactly the same manner as a claim based on infringement of Article 101 TFEU.
Although more difficult, there is also the potential to invoke Article 102 TFEU, which is mirrored by section 18(1) Competition Act which prohibits "abuse by one or more undertakings of a dominant position within the market …in so far as it may affect trade between Member States" or "…within the United Kingdom".
The international element
Many significant bribery cases will be international, with relevant acts occurring in various jurisdictions. This could create complexities, both in terms of the correct law to apply when determining liability, whether in contract or tort, and the identity of the correct jurisdiction to determine a claim. Each case will be fact dependent.
In relation to tortious claims, sections 10 and 11 of the Private International Law (Miscellaneous Provisions) Act 1995 may apply.
Section 11 states that "the general rule is that the applicable law is the law of the country in which the events constituting the tort or delict in question occur". However, under section 11(2) where elements of those events occur in different countries, the applicable law under the general rule is to be taken as being, "the law of the country in which the most significant element or elements of those events occurred". Therefore, depending on the circumstances, it may be a question of foreign law whether a tort has been committed as a result of a bribe, or what must be proved to succeed in a claim. It should be noted however that the Act excludes the application of foreign law if this would conflict with principles of public policy, and this may assist in defeating a claim that applicable foreign law absolves a bribing competitor from liability.
An example of the governing law being critical to the success of a claim is Fiona Trust v Dmitri Skarga and Others. The claim was brought by a Russian ship-owning group against its former senior officers for dishonestly entering into certain shipping transactions which were against the interests of the group. It was alleged that two of the former officers received bribes.
At first instance, amongst other matters, the judge found that bribes had been made in the amount of about US$350,000. He then went on to consider whether the Claimant had suffered any loss as a result of the bribes, and whether the Claimant was entitled to recover the profits said to have been induced by transactions entered into as a result of the bribes.
If English law was applicable, there would be an irrebuttable presumption that transactions were entered into as a result of bribes and the claimant would be entitled to recover the bribes because there is a further irrebuttable presumption that there was loss, at least, in the amount of the bribes.
By comparison, under Russian law a bribe is not recoverable if the claimant cannot show any loss, because a claimant is not entitled to recover the bribe, nor can a claimant recover the profits made by its bribed employee. Here, the Judge decided as a matter of fact that the bribes did not induce the transactions relied upon. The question of governing law was therefore critical.
Here, all the elements of the tort took place in Russia, particularly the promise and arrangements for any bribe. The fact Russian law was applicable was fatal to the claim for an account of profits.
In cases with international elements, defendants may also seek to argue that the English court does not have jurisdiction to determine a claim, or that a different jurisdiction is better placed to do so. These questions will turn on the particular facts, but the Court is likely to be slow to cede jurisdiction where it perceives that the defendant's intention is to avoid determination of a claim. For example, the English High Court has rejected a number of challenges to its jurisdiction to determine claims by foreign Governments against corrupt public officials who have used funds misappropriated abroad to acquire assets in the United Kingdom.
In all cases, a claimant which has been successful on liability will still have to demonstrate causation and loss. A claimant will typically seek damages assessed as the profits that would have been earned had the contract been awarded it. That could involve establishing that the claimant would have won the contract in a fair process, and that the contract would have been profitable. However, it may not be necessary to establish this on the balance of probabilities, as the claim could be put as loss of a chance to win the contract and earn the profits. Here, the claimant would need to demonstrate a real prospect that it would have won the contract (i.e. something more than fanciful), and the court would calculate damages on likely profits reduced to reflect its assessment of the likelihood that the contract would have been awarded to the claimant. Other limbs of loss could include the wasted costs incurred in participating in the tender.
Whilst there is no decided claim in the UK brought by a company against a bribing competitor, there are examples of successful claims in other jurisdictions. For example, in South Africa, the Supreme Court ordered a company that had won a contract by paying bribes to an official in a public body to pay substantial damages to the losing bidder. Further, in the United States, Compass Group, the world's largest catering firm, was investigated for allegedly bribing United Nations officials to secure contracts from the provision of food to peacekeeping forces. Two rival companies brought private lawsuits against Compass and others in the US. The plaintiffs alleged that they had lost business because of the corruption as part of their claim and eventually settled the case for a reported US$74 million.
The scope for such proceedings in the UK exists; together with increased litigation funding mechanisms here one can anticipate that in the future an unsuccessful and wronged tenderer may seek reparation.