Friday, 1 July 2011, saw the long-anticipated UK Bribery Act 2010 coming into force. This much talked about legislation modernises UK laws on bribery and corruption. It is expected to lead to higher levels of enforcement and a renewed focus on corporate compliance.
The modernisation of Irish bribery legislation in December 2010 by the implementation of the Prevention of Corruption (Amendment) Act 2010 has been overshadowed by this UK development. Although domestic and international businesses face potentially unlimited fines for breach of Irish anti-corruption laws, these laws are not receiving significant attention. The Garda Bureau of Fraud Investigation is the enforcement body in Ireland. While very few cases of corruption have been pursued in Ireland to date, the worldwide increased focus on anti-corruption laws is likely to have an impact on the Irish position.
Diligent enforcement worldwide under the US Foreign Corrupt Practices Act (FCPA) is escalating national enforcement actions in other countries. This increase is bolstered by industry-focused investigations, such as oil and gas, pharmaceutical and medical devices, and financial services. The prosecution of individuals and heightened levels of international anti-corruption cooperation have dramatically increased enforcement. If the UK Serious Fraud Office adopts this type of focus on worldwide investigation and co-operation, the UK Bribery Act 2010 is expected to have reverberations in many other countries, including Ireland.
A key similarity between the Irish and UK legislation is that both regimes penalise bribery and corruption offences committed anywhere in the world, though with different triggers for the penalty. Irish companies that ‘carry on business’ in the UK come within the worldwide remit of the UK Bribery Act 2010, meaning that Irish businesses that carry on business in the UK could be prosecuted under either the UK Bribery Act 2010 or the Irish Prevention of Corruption Acts 1889 to 2010.
The importance of implementing an anti-corruption programme:
The high levels of financial penalties imposed in recent years under the US Foreign Corrupt Practices Act and other foreign bribery legislation are pushing anti-corruption policies and procedures up the agenda for Irish businesses operating internationally, and for international businesses operating in Ireland.
Businesses should ensure that they introduce and implement anti-corruption compliance programmes and raise awareness of the potential consequences of allegations of bribery or corruption. Compliance programmes should be risk based but, most importantly, they should reflect and strengthen a culture which understands why corruption is bad for business and will not be tolerated. We can help design, and implement, a best-in-breed compliance programme.
The March 2011 publication by UK Justice Minister Kenneth Clarke MP of detailed Guidance on the implications of the UK Bribery Act 2010 has provided useful information on designing and implementing compliance programmes. The Irish Department of Enterprise, Trade and Employment issued guidance in 2008 on how to achieve robust anti-corruption policies under Irish law.
Companies being prosecuted under the UK Bribery Act 2010 for the offence of corruption will be able to avail of a full defence in circumstances where they have “adequate anti-corruption procedures” in place within their organisation. There is no such “blanket” defence available in Irish legislation. Nonetheless, implementing a compliance programme that is in line with the Irish guidance would be an important factor in defending a case in an Irish court.
One element of a strong anti-corruption compliance programme is to focus pre-contractual due diligence on possible bribery and corruption, and to update your contracts to include appropriate anti-corruption provisions.
In drafting due diligence questions or contractual provisions, it’s important to remember to cover international and not just Irish anti-corruption legislation, so the drafting should be as general as possible.
Possible examples of a general nature:
Suitable positive covenants, suitable for a general commercial agreement, might be: “[Party A] agrees that it will not, and that it will procure that none of its Group Companies will, engage in any conduct which would or might constitute a breach of Anti-Corruption Law. [Party A] agrees to: (a) comply with Anti-Corruption Law; and (b) [implement and] enforce appropriate and adequate Anti-Corruption Procedures.”
A suitable warranty regarding past conduct, suitable for an acquisition transaction, might be: “No Group Company: (a) has engaged in any conduct which would or might constitute a breach of Anti-Corruption Law; or (b) has received notice of or been party to any investigation, prosecution or other proceeding or any fine or penalty under Anti-Corruption Law (each a “Proceeding”); or (c) is aware of any circumstances which are likely to give rise to any such Proceeding.”
For these purposes, a typical definition of Group Company should be sufficient. “Anti-Corruption Law” could be defined as: “any statute, delegated legislation, EC regulation or directive, legally binding code of conduct or code of practice or other rule of law which regulates or prohibits bribery or corruption including (without limitation) the Prevention of Corruption Acts 1889 to 2010 of Ireland, the Bribery Act 2010 of the United Kingdom and the Foreign Corrupt Practices Act 1977 of the United States”.
Both the UK and Ireland have been heavily criticised in recent years for failing to ensure effective corporate liability for bribery. It was following particularly stringent criticism of the investigation by the UK Serious Fraud Office of allegations of bribery involving BAE Systems, that the UK introduced the UK Bribery Act 2010, which creates a strict liability offence of corporate bribery. The continued international criticism of Ireland’s failures to effect prosecutions for corruption, the strengthening of UK legislation and the expected increase in cases being pursued by the UK Serious Fraud Office will heighten the focus on bribery and corruption compliance within Irish companies.
Unlike other jurisdictions, such as the US, which only penalise the bribery of public officials, the Irish offence of corruption applies to Irish individuals, corporations and public officers. The Irish authorities can also prosecute offences committed abroad by Irish citizens, individuals ordinarily resident in Ireland, Irish registered companies and Irish officials.
Penalties for breach of Ireland’s bribery laws include an unlimited fine and ten years imprisonment for individuals prosecuted. Senior officers of a company who “consented or connived” in any bribery offence by a company may also be personally liable.
The introduction of whistleblowing provisions by the new bribery laws introduced in 2010 is also likely to impact on the prosecution of bribery and corruption in Ireland. Employers are obliged to ensure that employees who make disclosures of corruption in good faith are protected from civil liability and from penalisation by their employer, unless the disclosure is false or misleading. Employers found to have penalised a whistleblower will be subject to a maximum fine of €250,000.
Due to the difficulties in proving corporate liability for bribery, the UK Serious Fraud Office has pursued allegations of corporate bribery in recent years by seeking to recover monies generated through the criminal activity of third parties under the UK Proceeds of Crime Act 2002 rather than imposing criminal prosecutions. In Ireland, it is possible that the Gardaí could exercise their powers under the Irish Proceeds of Crime Act 1996 to similarly seize monies generated by corrupt conduct. The Gardaí have an express statutory power to seize and seek the forfeiture of a suspected bribe.