Earlier this year UK Justice Secretary Jack Straw presented a Draft Bribery Bill (the Bill) to Parliament for “pre-legislative scrutiny.” On July 28, 2009 the UK Parliament’s Joint Committee on the Draft Bribery Bill (the Joint Committee) issued a report (the Report) supporting and suggesting improvements to the Bill and urging the government to introduce it to Parliament as soon as possible. It remains to be seen whether Parliament will act on the legislation prior to a general election that is expected next spring. This update summarizes the significant provisions of the Bill, noting (where applicable) the recommendations made by the Joint Committee in its Report.
The Bribery Bill
The Bill represents a significant effort by the UK government to consolidate, simplify, and modernize its anti-bribery law. The Bill may signal greater commitment to combat bribery at home and abroad, and its enactment would create new compliance issues for companies conducting business in the United Kingdom.
The Bill follows repeated suggestions by the Organization for Economic Co-Operation and Development (OECD) for the United Kingdom to comply with the OECD Anti-Bribery Convention, which the United Kingdom signed nearly twelve years ago, and comes in light of recent pressure on the United Kingdom to strengthen its anti-bribery laws after the recently terminated investigation of a large defense contractor. According to Secretary Straw, the Bill would give “courts and prosecutors … the tools they need to tackle bribery effectively.”
The Bill would establish four general bribery offenses: (1) the giving, promising, or offering of a bribe; (2) the receipt or acceptance of a bribe; (3) bribery of a foreign public official; and (4) negligent failure by a “commercial organization” to prevent bribery. Of particular importance to corporations and corporate directors are the new offenses of bribery of a foreign public official and negligent failure to prevent bribery. The former clarifies the existing law and brings UK anti-bribery law closer to the requirements of the U.S. Foreign Corrupt Practices Act (FCPA); the latter introduces a new form of corporate liability that was effectively absent under prior UK anti-bribery law. If enacted, both of these provisions will create new potential liability — and thus impose new compliance responsibilities — for companies incorporated or operating in the United Kingdom.
Offense of Bribery of Foreign Public Officials
Prior UK law did not expressly refer to bribery of foreign public officials. While an amalgam of legislation dating back to the early 20th century arguably covered this type of bribery, the state of the law was unclear.
Under the new Bill, a person would be guilty of bribery of a foreign public official if through the bribe the person intended to influence a foreign public official in that official’s public capacity in order to obtain or retain business or an advantage in the conduct of business. The offense would exempt payments that are “legitimately due” to the official under local law. A foreign public official is defined broadly and covers legislative, administrative, and judicial officials of other countries (or any subdivision of such country); individuals who exercise a public function for countries other than the United Kingdom; and officials of public international organizations.
The new offense would operate as the UK equivalent of the FCPA. The two are similar in that they:
- Cover only the giving, offering, or promising of bribes to foreign officials and not the acceptance of them;
- Contain expansive definitions of the term foreign public official;
- Contain provisions covering bribes given indirectly through third parties; and
- Apply to citizens, residents, and corporations incorporated in the respective jurisdiction regardless of the location of the offending action.
In its Report the Joint Committee endorsed the creation of the offense of bribery of a foreign public official. With respect to the exception for payments “legitimately due,” the Report called for greater clarity in the Bill and sugges ted defining a payment as “legitimately due” only when the payment is permitted or required under the written law of the state of the foreign public official to whom the payment is made.
One distinction between the Bill and the FCPA is the treatment of so-called “facilitation payments.” Facilitation payments — small “grease” payments given to public officials to ensure that they perform their official duties — are exempted under the FCPA. The Bill makes no explicit mention of an exception for facilitation payments and thus appears to prohibit them. (This is consistent with the OECD Anti-Bribery Convention, which allows member countries to make their own decision in this regard.) However, whether facilitation payments will ultimately give rise to a prosecution under the Bill is another matter; previous comments by UK government officials suggest that they will not. The Report concluded that facilitation payments would be prohibited under the Bill, and called for greater clarity in prosecution policy relating to facilitation payments.
Another notable distinction between the Bill and the FCPA is the absence of any accounting and record keeping requirements in the Bill. Unlike the FCPA, the Bill would not require companies that are publicly traded (i.e. whose securities are listed) in the United Kingdom to keep accurate and detailed books and records.
Offense of Negligent Failure to Prevent Bribery
Arguably, the Bill’s most important change to prior UK anti-bribery law is the proposed addition of a new corporate offense for negligent failure to prevent bribery.
Under the Bill a “relevant commercial organization” would be guilty of failure to prevent bribery if (i) any person performing services for the company, (ii) bribes another person in connection with the company’s business, and (iii) a “responsible person” at the company was negligent in failing to prevent the bribe.
The Bill broadly defines the term “relevant commercial organization” to include any corporation incorporated in the United Kingdom, partnership formed in the United Kingdom, or company or partnership that carries on business in the United Kingdom. Under the Bill, it thus appears that a company headquartered outside the United Kingdom with limited UK operations nonetheless could be charged with negligent failure to prevent bribery even if the offending act or omission occurs outside the United Kingdom and has no nexus to the United Kingdom other than the company’s conduct of some (unrelated) business activities in the country. The Report requested clarification of the intended jurisdictional scope of the Bill.
The Bill would provide a defense from this offense where a company has “adequate procedures” designed to prevent persons performing services for the company from committing bribery. The defense is intended to provide an incentive to make “continuing and systematic efforts” to ensure that bribery is not committed on behalf of the company.
The Report called for guidance on the meaning of “adequate procedures,” noting that any guidance should stress that adequate procedures are to be interpreted in a “flexible and proportionate” way depending on the size and location of the company and that authorities should focus on a company’s actual practice rather than its “paper program.” Further, the Report noted the recent statement from the Director of the Serious Fraud Office (SFO) that identified a number of factors that constitute adequate procedures, including:
- A clear statement of an anti-corruption culture;
- Principles that are applicable regardless of local laws or culture;
- Individual accountability;
- A policy on gifts and facilitation payments;
- Training to ensure dissemination of the anti-corruption culture to all staff;
- Appropriate and consistent disciplinary processes; and
- Whether there have been previous cases of corruption within the corporation and, if so, the effect of any remedial action.
It appears that the “adequate procedures” defense would be available only where the negligence at issue was not that of a senior officer at the company. As the Report noted, it is hard to envision circumstances where compliance procedures will be adequate if a senior officer is at fault. In this regard, the Report called the offense of negligent failure to prevent bribery “narrow and complex.” The Report expressed a preference for focusing on collective (rather than individual) failure to ensure that an anti-bribery compliance program is in place. The Report thus proposed (i) to remove the need to prove negligence under this offense (creating a strict liability standard), and (ii) to remove the corresponding clause rendering the “adequate procedures” defense inapplicable where a senior officer was negligent, leaving any such negligence to be considered in the broader context of a company’s anti-bribery compliance approach.
Penalties Under the Bribery Bill The new Bill would impose severe potential penalties on both individuals and companies who commit an offense under the Bill. Conviction of negligent failure to prevent bribery would carry an unlimited fine, and conviction of bribery of a foreign public official would carry both a maximum penalty of ten years imprisonment per count, an unlimited fine, or both.
Additionally, the Bill would impose liability on senior corporate officers of companies that commit bribery if the bribery was committed with the “consent or connivance” of a senior officer. This would place corporate officers at risk of personal criminal liability for bribes committed by others.
The Report endorsed the penalties included in the Bill, but requested clarification from the government regarding how it will assess the unlimited fine.
Next Steps for the Bribery Bill The Joint Committee’s issuance of its Report signals that “pre-legislative scrutiny” of the Bill has concluded. Notwithstanding praise for the Report by (among others) the British chapter of the anticorruption watchdog group, Transparency International, the Report is not binding; for it to become effective, Parliament must incorporate the Report’s recommendations into the Bill.
Secretary Jack Straw recently expressed his intention to introduce the Bill in the current parliamentary session, putting the Bill on track to become law in early 2010. Some have questioned, however, whether there is sufficient time for the Bill to navigate its way through Parliament with less than a year remaining before the next UK general election.