Chris Grayling MP, Secretary of State for Justice, has confirmed that the Government has “no intention to relax the application of the Bribery Act” in response to a letter from the Bond Anti-Corruption Group, a collection of civil society organisations committed to tackling corruption and promoting international development.
Chris Grayling emphasised that the UK Government is serious about tackling corruption and that it has no plans to diminish the role of “world leading legislation”. Rather than changing the Bribery Act, the Secretary of State for Justice rightly indicated that the UK Government needs to make sure businesses, and particularly small and medium-sized businesses (“SMEs”), properly understand the requirements of the Act and the Ministry of Justice Guidance on the Bribery Act (“the Guidance”).
In early June we reported on speculation that the UK government may be considering a review of the Bribery Act available here. In agreement with many commentators, we agreed that the Bribery Act was robust and fit for purpose and that any tinkering with the Act would undermine its potency and serve to confuse further. A better approach, as Mr Grayling has accepted, and the Bond Anti-Corruption Group suggested, was to provide further clarification and guidance to SMEs on certain areas in the Bribery Act. There is, for example, a feeling of uncertainty on the scope of adequate procedures to be introduced by companies to prevent bribery and how to ensure they are proportionate so as to avoid expending unnecessary costs.
The Bond Anti-Corruption Group has further asked for any revision of the Guidance, if there is one, to provide clarification on certain key areas including:
- Extra-territoriality: The Group want ambiguity concerning jurisdiction to be clarified so as to prevent “an unfair playing field for UK companies”. By that the Group mean ensuring the Act captures all companies listed on UK stock exchanges and foreign companies that operate subsidiaries in the UK. The Guidance presently states that: “having a UK subsidiary will not, in itself, mean that a parent company is carrying on a business in the UK, since a subsidiary may act independently of its parent or other group companies.” In those circumstances the foreign parent company might avoid liability under the Act for the conduct of its subsidiary.
- Subsidiaries and joint ventures: The Group suggest that the Guidance introduces ambiguity in relation to liability for bribes paid by joint ventures and subsidiaries. The concern is that this “loophole” could be exploited by unscrupulous companies, and so the Guidance should confirm that companies should be held liable for bribes paid by their subsidiaries and joint venture partners, even if they benefit indirectly from that relationship. The Guidance currently says: “Even if it can properly be said that an agent, a subsidiary, or another person acting for a member of a joint venture, was performing services for the organisation, an offence will be committed only if that agent, subsidiary or person intended to obtain or retain business or an advantage in the conduct of business for the organisation. The fact that an organisation benefits indirectly from a bribe is very unlikely, in itself, to amount to proof of the specific intention required by the offence.”
- Prosecutorial discretion – “public interest” test: The Group believe it is in the public interest that a prosecution should take place in all serious instances of bribery. The recent draft joint Prosecutors’ Code on the use of Deferred Prosecution Agreements does not signal the puritanical approach envisaged by the Group by allowing for deferred prosecution agreements if certain public interest factors weigh against a prosecution including a genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice, involving self-reporting and remedial actions. The Serious Fraud Office is grappling with a difficult balancing exercise here between the desire not to discourage companies from self-reporting and the need to fulfil its public function of punishing serious wrongdoing. However, the joint draft Code does say: “The more serious the offence, the more likely it is that prosecution will be required in the public interest. Indicators of seriousness include not just the value of any gain or loss, but also the risk of harm to the public, to unidentified victims, shareholders, employees and creditors and to the stability and integrity of financial markets and international trade. The impact of the offending in other countries, and not just the consequences in the UK, should be taken into account.”
Chris Grayling has not confirmed whether a formal review of the Guidance will be initiated. There are upsides in terms of providing more clarification on the Bribery Act’s application. But there is a danger in doing so, in that it might allow a window of opportunity to those that want to seek to dilute the Bribery Act through the Guidance to do so. Another approach might be to maintain the status quo and hope through Serious Fraud Office’s enforcement of the Bribery Act that clarity is provided on the interpretation of the legislation through the Courts in a similar way to the evolution of the US Foreign Corrupt Practices Act. However, such judicial interpretation is not likely to materialise in the very near future. Overall, as Nick Maxwell of Transparency International recently blogged here, there is a need for the UK Government to increase the effort to better educate and inform companies, especially SMEs, on their obligations under the Act, which will help in watering down criticism of the Act as opposed to the Act itself.
A copy of the Bond Anti-Corruption Group’s letter and Chris Grayling’s response is available here.