Earlier this year, the UK enacted new legislation which should be of concern to Canadian companies operating internationally.
In the U.K., the Bribery Act 2010 introduces new concepts to anti-corruption regulation that will affect any Canadian company with operations in that country. These concepts go much further than those found in Canada’s Corruption of Foreign Public Officials Act (CFPOA) or the U.S.’s Foreign Corrupt Practices Act (FCPA).
While The Bribery Act has many interesting provisions, the most notable is that it creates a corporate offence of failing to prevent bribery. In essence, this is a strict liability offence which arises if there is any bribe (or even an attempt to bribe) made on behalf of the company, whether or not the company was aware of the actions. The effect of this provision is to provide a defense to a company only if it has in place “…adequate procedures designed to prevent persons associated with the commercial organization from undertaking such conduct.”
In Canada, the CFPOA has no such provision. Under Canadian criminal law, intention is required to commit the criminal offences under the CFPOA. In certain circumstances, where a company chooses to be willfully blind to the payment of the bribe such that it deliberately fails to make inquiries (when it suspects there is reason for inquiry), it will be found to have the necessary intent. It is for this reason that, since the enactment of the CFPOA, Canadian companies have been encouraged to put in place anti-corruption policies and training. Under the Bribery Act, the standard is much higher. Without evidence of such procedures, whether the company knew about the bribe or not, liability will be imposed.
As a result, any Canadian company that operates in the U.K. without a robust program to ensure that bribery does not occur will face liability under the Bribery Act. Furthermore, the Bribery Act imposes personal criminal liability on senior officers for offences committed by the company. The staggering effect of this standard has yet to be fully acknowledged. For corporate officers of companies with U.K. operations doing business in any of the myriad countries where corruption may be a fundamental component of business, criminal liability lurks by mere virtue of failing to have a proper anti-corruption compliance program in place. Common sense would suggest that, when the Bribery Act comes into force, it would be foolish to conduct business without such a compliance program.
While the U.K. has yet to issue any guidance on what it believes would constitute “adequate procedures”, anti-corruption practitioners are fairly united in their perspective that the following practices are critical:
- Create a detailed anti-corruption compliance policy overseen and approved at the board level, including a policy on facilitation payments, hospitality, and travel.
- Review existing relationships involving foreign jurisdictions and ensure that regular, fulsome, documented due diligence is carried out on all third parties associated with the company, including agents and joint venture partners.
- Ensure that specific anti-bribery clauses are included in all commercial contracts, and that contracts are monitored to ensure compliance.
- Engage in regular anti-corruption training for all staff involved in dealing with either foreign parties or with third parties who deal with foreign parties on behalf of the company. In particular, ensure that sales staff very clearly understand the company’s policy on facilitation payments.
- Create procedures for ensuring that payments to foreign agents are subject to scrutiny.
- Ensure that an effective whistleblower mechanism is available to all employees to facilitate the confidential airing of bribery concerns.
- Reconsider doing business in any country where it is unlikely that business can be done without the payment of bribes.
The Bribery Act will come into force in April, 2011. Prior to then, the UK Government intends to issue a guidance on what will constitute “adequate procedures” so that companies will have a better idea of what changes they must make to their existing anti-corruption program.
One other notable provision of the Bribery Act is that it contains a blanket prohibition on facilitation payments. This is a marked departure from both the CFPOA and the FCPA which both exempt the modest payments often required to make an official do their job faster. For example, in Canada under the CFPOA a payment will not be considered to be a bribe if it is “made to expedite or secure the performance … of any act of a routine nature that is part of the … official's duties or functions.” The CFPOA gives a number of examples that include the processing of visas, issuances of licenses or police protection.
Regrettably, the CFPOA does not provide any further detail about these exceptions and Canadian executives incorrectly rely on this escape clause to justify corrupt payments. It is likely that the intention of this exception was to permit those payments that are routinely requested by minor functionaries in developing countries, who rely on these payments for their wages. Unfortunately, the CFPOA does not give any guidance on the size of the payment, and it is at best a grey area as to whether a million dollar bribe to a Minister to speed up his approval process would be deemed a criminal act. The subject of facilitation payments has long been a sore spot in the anti-corruption debate, and last year, the OECD Working Group on Bribery recommended that member countries review their position on facilitation payments and consider whether to maintain the exemption. Clearly the UK has done so.
As a result of this new legislation, the UK will become one of the world leaders in anti-corruption legislation. However, whether or not the UK will follow through with the required necessary enforcement remains to be seen.