On 1 July 2011 the UK Bribery Act 2010 (the "Act") comes into force. The Act will implement one of the most stringent anti-bribery regimes in the world - stricter in a number of respects than even the US Foreign Corrupt Practices Act. This will have consequences for commercial organisations worldwide.
Here are the key issues that need to be considered by a corporate headquartered outside the UK.
How are you caught?
If you carry on business in the UK then you will be caught by the Act.
The mere fact that you have a UK subsidiary or securities listed in the UK does not necessarily mean that you will be subject to the Act. However, whether a corporate carries on business in the UK is inevitably a question of fact, which will require an examination of the corporate's ties to the UK.
Aside from corporate liability, individuals in the UK, or who hold a UK passport, will have personal exposure under the Act.
What are the consequences?
If you do carry on business in the UK then you will be exposed to the new criminal offence that imposes strict liability on corporates for acts of bribery, including facilitation payments and potentially even corporate hospitality, committed anywhere in the world. This covers both bribes paid to public officials as well as bribes paid in a commercial context. It also applies to bribes paid not just by your employees but by anyone "performing services" for you (see below).
As a result, your company could be held criminally liable for a bribe paid by a third party acting on your behalf in circumstances where the conduct did not have any connection to the UK.
A corporate found guilty of an offence under the Act is liable to an unlimited fine. Indeed, the UK courts have signalled that UK fines should match those seen in the US, which often exceed US$ 100 million.
How is the offence committed?
As noted above, the Act is designed to hold corporates liable for bribes paid by their "associated persons." These are persons who "perform services" for you or on your behalf, and include employees, subsidiaries, agents, joint ventures, suppliers or other contractors, wherever they operate in the world. However, you will only be liable where the "associated person" acted with an intention to obtain or retain a business advantage for you (rather than simply for themselves).
Significantly, the UK government has offered some comfort about the manner in which the Act will be applied and enforced. For example, they have made clear that parent companies will not automatically be liable for the acts of their subsidiaries merely on the basis that they ultimately benefit from those acts in the form of dividends or increased share value.
What impact does this have on your compliance programme?
You can only avoid conviction for the corporate offence if you can show that you had "adequate procedures" (ie an adequate compliance programme) in place to prevent bribery. In other words, a corporate is given the chance to demonstrate that any improper conduct was an isolated incident rather than an institutional failure.
Importantly, the response of a corporate to the Act is expected to be proportionate to its level of risk. The extent of the compliance measures required is therefore dependent on the size of the corporate, the industry in which it operates, and the nature of its interactions with third parties.
We have been working extensively with a wide range of our clients to identify the extent to which their business falls within the scope of the Act and to review their existing systems and policies in order to ensure that "adequate procedures" are in place so as to provide a defence under the Act.
We are able to advise on your exposure, stress-test your compliance programme and advise on the steps that can be taken to mitigate the risks of prosecution.