The Bribery Act was enacted in the UK on 8 April 2010 and will come into force on 1 July 2011, following a period of delay due to lobbying by businesses concerned over the scope and impact of the Act and a Government consultation (including the publication of draft guidance on the practical operation of the Act) at the end of last year.
The Act applies to companies incorporated in the UK as well as foreign companies carrying on a business, or part of a business, in the UK. Therefore, companies incorporated in Russia and doing business in the UK, the UK subsidiaries of Russian companies and Russian subsidiaries of UK companies could be liable under the Act. The Act will apply to all entities “carrying on a business in the UK” and it will be up to the UK Courts to decide on a case-by-case basis the extent to which the Act also applies to foreign companies with little connection to the UK (e.g. nothing more than a listing on the London Stock Exchange), although the UK Government in its guidance on the legislation indicated that there would need to be at least a demonstrable business presence in the UK for a corporation to be covered by the Act.
The offence of ‘Bribery’
The Bribery Act has been created in order to replace and dramatically transform existing UK anti-corruption law, which is a complex and outdated mixture of statutory and common law offences. The Act introduces a fundamentally different concept of bribery, as well as a new strict liability corporate offence.
Click here to view table "Summary of offences under the Bribery Act"
The first three offences above apply both to individuals and corporations. The fourth offence is a strict liability offence that applies only to corporations. All four offences may be committed anywhere in the world.
Incurring liability; penalties; and a defence to the corporate offence
A corporation can incur liability through the acts of its “associated persons”, which may include employees and agents, as well as its subsidiaries, intermediaries, distributors and joint venture partners, provided they were performing services for the corporation. The corporation need not have directly participated in, or had knowledge of, the act of bribery. It is not necessary for the person performing the services to be convicted of bribery for the corporation to be held liable.
The penalties for non-compliance with the Act are severe: corporations face unlimited fines; possible confiscation of the proceeds of any benefit gained through the bribery; and permanent exclusion from tendering for EU public contracts. Individuals also face the prospect of up to 10 years’ imprisonment.
Only one defence is available to the corporate offence: the corporation must show that it had “adequate procedures” in place, designed to prevent bribery on its behalf (there are no defences to the other offences). The Act does not detail what will be considered “adequate procedures”, although the Government has recently published guidance on the sorts of protections corporations may wish to implement in this regard. The type of procedures considered “adequate” will vary according to a corporation’s size, sector and geographical area of operation. In any event, however, corporations will need to demonstrate a commitment to anti-corruption efforts through, for example, policies on payments, gifts and hospitality; due diligence of agents and consultants; staff training; financial controls; and monitoring, reporting and investigation procedures.
The Bribery Act enforces a stricter regime than its US counterpart, the Foreign Corrupt Practices Act (“FCPA”), by prohibiting the bribery of private citizens in addition to that of government officials, and prohibiting facilitation payments without exception. The upshot for corporations is that, if they already have in place established FCPA compliance policies, they should review these policies to check that they are “adequate” for the purposes of the Bribery Act.
An additional matter to consider is that Russian companies which borrow on the Euromarket may be asked in their Loan Agreements to make representations to the effect that they are not behaving in a manner inconsistent with the Bribery Act.
The Bribery Act, and in particular its corporate offence of “failure to prevent bribery” will ensure that the new regime is one of the strictest in the world, making companies vicariously liable for public and private sector bribery by their employees, agents and even loosely connected parties.
Russian companies, which have designed and put in place adequate FCPA compliance programmes must consider whether they possess sufficient internal procedures for the purposes of the Bribery Act: