As corporations become more international and grow in size, so does their liability risk as well as that of their managers. White Collar Crime – especially bribery, fraud and money laundering – and Compliance is steadily gaining in significance. With its “White Collar Crime Primer” Central European law firm schoenherr presents a practical guideline designed to lead businesses safely through the business crime law labyrinth in a total of 18 jurisdictions. One of the jurisdictions featuring in this primer is the UK, where a new Bribery Act came into effect on July 1st, 2011.
KEY POINTS OF THE ACT
- The general offence of bribery
The UK Bribery Act 2010 (the "Act") covers active and passive bribery in the private and public sectors. Unlike many anti-bribery laws in the CE/CEE-region, it does not provide any monetary limits up to which a person can offer gifts without being held criminally liable.
Under the Act, a bribe is defined as the giving or receiving of a financial or other advantage (or the offer or promise to do so) with the intention of bringing about the "improper performance of a function or activity". Pursuant to the prosecutor's guidance, such an improper performance "involves a breach of an expectation of 'good faith', 'impartiality' or 'trust' in respect of the function or activity carried out. […] The expectation in question is that which would be had, in the circumstances by people of moral integrity […] it will be for the tribunal of fact to decide what that expectation amounted to, in the circumstances." (Joint Prosecution Guidance of the director of the UK Serious Fraud Office and the director of the Public Prosecution).
The offences in the Act apply to anybody who commits the offence (i) at least partly in England and Wales, Scotland or Northern Ireland or (ii) outside the UK, but has a close connection to the UK. A person is considered to have a "close con-nection" to the UK if they are
- British citizen / British overseas territories citizen / British national overseas / British overseas citizen
- a person who under the British Nationality Act 1981 was a British subject/British protected person within the meaning of that Act
- an individual ordinarily resident in the United Kingdom
- a body incorporated under the law of any part of the United Kingdom or
- a Scottish partnership
- The offence of bribing a foreign public official
The act creates a standalone offence of bribery of a foreign (non-UK) official that is stricter than the general bribery offence in that there is no requirement that the person offering or paying the bribe intends the official to act improperly, only that the person intends to "influence" the foreign public official in his official capacity and intends to obtain or retain a business advantage.
- The new corporate offence
The Act introduces a completely new corporate offence of failure by a commercial organisation to prevent bribery if a bribe was paid by a person associated with the company. Associated persons can include employees, agents, contractors, suppliers where they are performing services rather than simply acting as a seller, joint ventures where the bribe is paid for a member of the joint venture and with the intention of benefitting that member and subsidiaries if the bribe was made to benefit the parent company. An indirect benefit is not sufficient to constitute an offence.
The corporate offence can be committed by a "relevant commercial organisation" only. The Act defines a "relevant commercial organisation" as
- a body or partnership incorporated or formed in the UK irrespective of where it carries on a business; or
- an incorporated body or partnership which carries on a business or part of a business in the UK irrespective of the place of incorporation or formation.
The key element here is the "carrying of a business". The courts in the UK will be the final arbiter as to when an organisation "carries on a business" in the UK taking into account the particular facts in individual cases. What we now know is that as regards bodies incorporated, or partnerships formed, outside the UK, whether such bodies can properly be regarded as carrying on a business in any part of the UK will be answered by applying a commonsense approach. The UK Minister of Justice stated that the government anticipates this to mean that organisations that do not have a demonstrable business presence in the UK would not qualify as commercial organisations within the meaning of this Act.
So far many people have assumed that the activity of a sister company paying bribes in another country would not trigger a Bribery Act liability for a foreign parent (or its UK subsidiary). Only recently, however, Richard Alderman, director of the SFO in UK, made it clear that the SFO may take a different view when saying that it may be dangerous for companies to use a highly technical interpretation of the law to persuade themselves that they are not within the Act. At the US-Russia Business Council Legal Seminar 2011 he explained that the sort of cases the SFO will be interested in are those where the bribe disadvantaged an ethical UK corporation. For him there is a strong UK public interest in bringing such cases before the UK courts.
But the most important and effective defence for an organisation is to show that it has "adequate procedures" in place to prevent bribery (see below "Preventive measures to prevent bribery").
- Reasonable and proportionate hospitality is still allowed
Bona fide hospitality and promotional or other business expenditures that seek to improve the image of a commercial organisation, to better present products and services or establish cordial relations are not prohibited by the Act. The government does not intend for the Act to prohibit "reasonable and proportionate" hospitality and promotional expenditure incurred in "good faith" for these purposes and that prosecutors would take into account the standards or norms that apply in a particular sector when considering whether bribery has taken place. Businesses can still establish and disseminate appropriate standards for hospitality and pro-motional or other similar expenditure. Tickets to sporting events, taking clients to dinner, offering gifts to clients as a reflection of good relations or paying for reasonable travel expenses in order to demonstrate goods or services to clients will not amount to bribery as long as they are proportionate to the business.
Small payments paid to facilitate routine public or government actions (facilitation payments) are still unlawful. Businesses may continue to pay for legally required administrative fees or fast-track services as these are not facilitation payments. The common law defence of duress is likely to be available where individuals are left with no alternative but to make payments in order to protect against loss of life, limb or liberty.
PREVENTIVE MEASURES TO PREVENT BRIBERY
In addition, the UK government has published a particular guidance (the "Guidance") for commercial organisations about how they can reduce their exposure to bribery offences under the Act. The Guidance is important as it provides clarification in relation to what will constitute "adequate procedures".
The full text of the Guidance can be found here: http://www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf
The key points of the Guidance are formulated around the following six general principles:
- proportionate procedures
- top-level commitment
- risk assessment
- due diligence
- communication and
- monitoring and review
Separate prosecution guidance has also been issued on 30 March 2011, stating that prosecutions will normally be instigated unless there are public interest arguments to the contrary. Large or repeated payments or payments that were planned for or were accepted as a standard way of conducting business are stated as factors tending in favour of a prosecution.
For a brief overview of the UK Bribery Act as well as practical guidelines to similar legislation in the US and 16 jurisdictions in Central and Eastern Europe, download Schoenherr’s recently published primer to “White Collar Crime” in CEE here: http://www.schoenherr.eu/news-publications/publications/primer-white-collar-crime