For all businesses operating in the UK, the Bribery Act is of serious concern, particularly to senior management, and even the most scrupulous. All business should reconsider their compliance programmes; if they don’t have one, they should get one!
It may be distasteful to be concerned with the subject, but the Act creates serious risks of criminal liability for individuals (including not only the briber but also managers of the briber) and the business which employs the briber.
The Act replaces the previous anti-corruption and bribery laws, e.g. the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916 and abolishes the UK common law offences of bribery and embracery.
The Act goes much further. It is not just a “public sector” concern. It is not just an “international trade” concern.
The Act is intended to “provide a modern and comprehensive scheme of bribery offences to equip prosecutors and courts to deal effectively with bribery at home and abroad.”
The Act has been described as just one part of a broader attempt to improve the UK’s record in this area, which includes new vigour on the part of the Serious Fraud Office, as indicated by recent successful prosecutions.
The Act is a response to long-term pressure from the Organization for Economic Co-Operation and Development for the UK’s lack of clear substantive prohibitions on bribery, and failure to implement comprehensively and enforce its obligations under the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
The Bribery Act will come into effect in April 2011, to allow time for business to adapt to Guidance, which is itself scheduled for publication in January. The Government has promised to start a consultation on the draft Guidance in September.
When the Act is in force, individuals can be prosecuted for making an offer to, or a promise to, bribe where such promise or offer gives a financial or other advantage to another person to obtain a reward. The bribe need not be financial but can be of “other value”. This can occur for any function “of a public nature” (i.e. a governmental official) or “connected with a business” (i.e. private entity).
The Act makes it a crime to accept a bribe where a person agrees to receive or accepts something of value - it occurs whether or not the person actually receives it, if the action is linked to procuring improper performance. The Act prohibits such actions by both public officials and those “connected with a business”. The test for whether an offer or promise is a bribe is “what a reasonable person in the UK would expect in relation to the performance of the type of function or activity concerned.”
In addition to the ongoing corporate liability for its employees engaging in bribery, the Act creates a strict liability offence when a business fails to prevent bribery. If an employee offers or makes a bribe and the person who has the managerial responsibility of preventing bribery fails to prevent the bribe, that person and the business can be liable. If there is no specific 'person responsible' for preventing bribery within the business, responsibility lies with any senior officer, such as a director, secretary or manager.
The only defence is if the company can show it had “adequate procedures designed to prevent…such conduct.” The Act requires the Government to publish guidance on “adequate procedures” – it is this draft Guidance that is expected in September. It is expected that the Guidance will expect measures which bear some relation to the size of the company, its business sector and the degree to which it operates in markets known to reflect high levels of corruption.
Transparency International publishes a helpful “league table” showing the perception of corruption around the worlds and a similar index of the perceived likelihood that executives from particular countries will engage in corrupt practices.
The Act has extra-territorial application, so any UK citizen or company transacting business anywhere in the world can be liable under the Act, in the UK. The relevant criminal act can occur outside the UK and persons or companies in the UK can be liable. Non-UK companies are covered as well if they have a UK office or operation. The illegal conduct need not have been approved by, or financed by, the UK branch or subsidiary. The existence of a UK presence will be sufficient to establish jurisdiction. For example, if an American company has a UK branch or subsidiary, and the American company engages in bribery in the former Soviet Union, that American company’s UK branch or subsidiary can be prosecuted in the UK.
- Individuals can be jailed for up to 10 years per offence
- Individuals and businesses can be liable for unlimited fines
- Businesses can be ordered to pay compensation.
- Businesses can become disqualified from participation in public contracts.
- Directors can be disqualified from holding directorships.
Contrast with the US Foreign Corrupt Practices Act
Many international businesses are familiar with the US Foreign Corrupt Practices Act (FCPA). The Bribery Act is significantly broader and stricter. More serious criminal penalties are available to UK prosecutors. Many businesses must comply with both. The significant differences between the two are as follows.
Public v. Private
The FCPA aims to prevent and penalise corruption of foreign governmental officials. The Bribery Act specifically covers non-governmental officials, i.e. private citizens, also.
The FCPA contains a specific defence for “facilitation payments”, i.e. unofficial payments intended merely to expedite matters, rather than influence the exercise of a substantive discretion. The Bribery Act contains no such defence; even corporate hospitality could be prohibited if “intended to subvert the duties of good faith or impartiality that the recipient owes to his employer”.
Strict Liability for Failing to Prevent Bribery
The FCPA has no strict liability either written directly into the statute or as interpreted by the courts. The Bribery Act creates a new strict liability corporate offence for the failure of a corporate official to prevent bribery.
The FCPA has criminal penalties of 5 years per offence. The Bribery Act has penalties of up to 10 years per offence.
The main defence is the ‘adequate procedures’ defence. Businesses should study the guidance and implement their own procedures.
Those who provide goods, works or services to the public sector should already be familiar with provisions relating to the prevention of corruption. Those provisions will often derive from standard wording provided by governmental authorities, such as the Office of Government Commerce.
Those contracts will need to be revised in order to reflect the extension of the law to include the proposed offence of the failure by business organisation to prevent bribery. Although this is an offence committed by the business and not by the public authority, public authorities are likely to include warranties, and possibly the right to terminate the contract, in any such event.
We recommend that both businesses and public authorities become familiar with the new regime before it is in force. Mere alteration of contractual provisions will be of no effect if misconduct continues as before. In those circumstances, the mere alteration of contractual terms is likely to be disregarded in any defence. For conduct to alter, it is clearly advisable for both business and public authorities to undertake:
- A thorough review of their codes of conduct;
- Top-level responsibility for risk management and avoidance;
- Training of staff;
- Effective procedures for avoiding the offences; and
- Monitoring and auditing of these required procedures, to ensure practical compliance.
The Bribery Act is a significant departure for the UK in this area. It is the culmination of many years of debate within the British government on how to move forward with its responsibilities under the OECD Convention. The Bribery Act is significantly stronger than the US FCPA. Many internationally focused companies have offices in the UK or employ UK citizens in their world-wide operations. This legislation could open them to prosecution in the UK. Businesses should review the draft Guidance, and be ready to change their compliance procedures to incorporate the required changes. Those without proper compliance procedures should get to work. In short, all businesses should consider the implications of the Act!