The United Kingdom’s 2010 Bribery Act (the “Bribery Act”) becomes effective in July 2011. As discussed below, this law has wide-ranging implications that will affect companies that conduct global sales and have a presence in the UK. International companies should pay particular attention to this law in light of the growing level of global anti-corruption enforcement. The UK Ministry of Justice recently released guidance suggesting that it will adopt a “common sense” approach to the Bribery Act’s provisions, but this new enforcement regime will require companies to review their anticorruption programs to ensure compliance.
The Bribery Act expands the scope of the UK’s common law and is broader and more severe than the United States’ Foreign Corrupt Practices Act (FCPA). For example, the Bribery Act includes criminal penalties for bribes between commercial entities, creates a strict liability corporate offense for failure to prevent bribery and makes no exception for facilitation (or “grease”) payments. As discussed further, however, the UK has affirmed that, in practice, companies can expect an interpretation that is roughly consistent with the guidance that most FCPA practitioners already provide to clients.
Specific aspects of the UK Bribery Act include:
- Broad Definition of Bribe: Under the Bribery Act, an illegal “bribe” includes any “financial or other advantage” offered with the intention to persuade or reward any person for improperly performing any function or activity related to a business or to that person’s employment. This definition of “bribe” extends far beyond the FCPA’s, as it covers bribes offered or received in almost any business or commercial context, not just bribes of public officials. The Bribery Act furthers its reach by making irrelevant whether the bribe is offered through a third party, whether it relates to a public function, whether it is made “corruptly,” or whether the intended recipient of the bribe knows or should know that the subject function or activity of the bribe is improper. And unlike the FCPA, the Bribery Act penalizes recipients and requesters of bribes in addition to offerors and providers of bribes.
- Low Threshold for Bribes of Public Officials: The Bribery Act has a low threshold for bribes made to public officials. Under the Bribery Act, it is illegal to merely intend to influence a public official for the purpose of retaining business. It does not matter whether such intention is accompanied by a “financial or other advantage” or whether it contemplates improper activity.
- Strict Liability for Companies: The Bribery Act’s strict liability corporate offense provision poses particular concern to companies that conduct business in the UK. Under this provision, a company that carries on a business, or part of a business, in the UK can be held strictly liable if anyone “associated with” the company commits bribery, regardless of whether the bribery takes place in the UK or elsewhere, unless the company has “adequate procedures” in place designed to prevent such behavior. The Bribery Act states that a person is “associated” with a company if he performs services for, or on behalf of, that company.
Guidance on Interpretation of the UK Bribery Act
The Bribery Act did not define “adequate procedures”; instead, it charged the Secretary of State to publish guidance clarifying its scope. The Secretary of State recently published the Ministry of Justice’s official guidance on the Bribery Act, which, as discussed below, guides companies to manage bribery risks through a risk-based approach—not unlike the approach under the U.S. Sentencing Guidelines standards for an effective corporate compliance program. Importantly, the “common sense” approach set forth by the UK authorities should allow international companies to continue to provide reasonable levels of hospitality to foreign officials. Indeed, the specific examples that the Ministry of Justice provided regarding acceptable levels of hospitality included provision of things like flights, meals and tickets to entertainment events. In some ways, the policy set forth by the UK is even more lenient than that under the FCPA. Nonetheless, companies should be mindful to maintain adequate controls and provide hospitality that is proportionate and reasonable. They also should consider a policy that can be applied globally. The guidance also sets forth six principles that companies should consider in establishing “adequate procedures” to prevent bribery. These will be familiar concepts to any company with a U.S. compliance program:
- Proportionate Procedures: The guidance emphasizes that a company’s bribery prevention procedures should be proportionate to the bribery risks the company faces. It recommends that companies thoroughly evaluate potential areas of risk and design its procedures to mitigate against them in a practical and reasonable manner.
- Top-Level Commitment: The guidance stresses the importance of top-level commitment to bribery prevention. Top-level employees should foster a culture that is committed to preventing bribery. Top-level commitment may be demonstrated through frequent communications from executives or through executive involvement in developing bribery prevention procedures.
- Risk Assessment: The guidance suggests that companies frequently assess areas that may create exposure to bribery risks. These assessments should be periodic, informed and documented. The guidance also suggests that top-level management should oversee such risk assessments.
- Due Diligence: The guidance recommends that a company apply due diligence procedures with respect to persons or entities conducting business on the company’s behalf. Depending on the associated risk and available resources, due diligence may be conducted internally or by external firms.
- Communication (Including Training): The guidance instructs companies to effectively communicate their bribery prevention policies and procedures to employees. Frequent communication and effective training reduces the risks of bribery. Again, the guidance suggests that such communication is most effective when it conveys a “tone from the top” commitment.
- Monitoring and Reviewing: The guidance encourages implementing monitors and reviews designed to prevent bribery. These may range from staff surveys and questionnaires to periodic top-level management reviews.
Recommendations for Anti-Bribery Compliance
Companies must maintain adequate bribery prevention procedures to reduce potential liability and to ensure ethical business risks. In particular, companies with international operations (and especially a presence in the UK) should have the following in place:
- regular training on the FCPA and Bribery Act’s prohibitions, including the distinctions between the two, such as the Bribery Act’s prohibition against facilitation payments and its extension to the private sector;
- a policy that requires employees to contractually agree to anti-bribery compliance policies that include provisions tailored to the Bribery Act’s prohibitions;
- standardized review of all international contracts to ensure compliance with the FCPA and Bribery Act;
- a gifts and gratuities policy that accounts for FCPA and Bribery Act provisions;
- due diligence procedures for persons or entities conducting business on behalf of the company;
- an ethics hotline to allow employees to disclose anonymous reports of compliance-related violations;
- standard monitoring and auditing of employee expenditures; and
- top-level communication emphasizing zero tolerance bribery policy.