The UK Bribery Act—one of the world’s strictest anti-bribery regimes—will come into force on 1 July 2011. The Act carries with it penalties of up to ten years imprisonment for individuals and potentially unlimited fines for companies.
The UK Ministry of Justice has released guidance in relation to the Bribery Act (Guidance). According to the Guidance, the Act does not intend to capture bona fide, reasonable and proportionate business expenditure which seeks to improve the image of the commercial organisation, better present products or services or establish cordial relations.
However, it is clear from the Guidance that anything of value may be regarded as a bribe where:
- it amounts to a financial advantage or other advantage
- there is an intention to influence a foreign official and retain or obtain business or a business advantage, and
- there is a ‘sufficient connection’ between the expenditure and that intention.
The principal offences relate to the offering, promising or giving of a bribe (‘active bribery’) and the requesting, agreeing to receive or acceptance of a bribe (‘passive bribery’). Those offences apply to companies and individuals and cover bribery in the public and private sectors. A further offence of failing to prevent bribery has been introduced. This is a particular concern for companies.
Beware Australian companies with any connection to the UK
In response to the reaction of British business' that the Bribery Act will be to its competitive disadvantage, UK regulators have signalled that they intend to actively prosecute non-UK companies caught by the Act. This includes Australian companies doing business abroad.
The Bribery Act may have serious implications for Australian companies that have any demonstrable business presence in the UK. Its reach is far broader than either the Australian Criminal Code (Criminal Code) or the US Foreign Corrupt Practices Act (FCPA)—Australian companies that carry on any ‘part’ of their business in the UK may be exposed to liability under the Bribery Act.
Most controversially, an Australian company may commit the offence of failing to prevent bribery by an ‘associated person’ (eg an agent, contractor, employee) and be liable to prosecution in the UK. It is irrelevant:
- where the bribery occurred
- whether the bribery relates to the company’s UK business
- whether the company knew of the bribery
- whether the associated person has any connection to the UK, or
- whether the associated person has been prosecuted or convicted.
Beware Australian companies in foreign partnerships and joint ventures
Companies will be guilty of an offence if an ‘associated person’ bribes another intending to obtain or retain business or an advantage for that company – regardless of whether the company was aware of the bribery, unless the company can show it had adequate procedures in place to combat bribery.
The Bribery Act does not define what adequate procedures are. Though not binding, the Guidance suggests that UK regulators will expect extensive procedures to be in place, before they will be considered to be ‘adequate’. Ultimately, whether particular procedures are adequate will depend on the circumstances. Freehills can assist in designing or reviewing procedures to confirm their ‘adequacy’.
Beware facilitation payments
In stark contrast to the FCPA and Criminal Code, the Bribery Act contains no exception in relation to facilitation payments (ie small payments to officials paid to expedite or secure the performance of routine government action). If a facilitation payment, no matter how small or minor, is paid to influence a foreign official and obtain a business advantage, liability may be triggered.
This should be of serious concern to Australian companies operating in developing economies, where such facilitation payments may be a way of life for local businesses and minor government officials.
Beware directors and senior officers
For certain offences, if a company has committed an offence under the Bribery Act, a senior officer of that company will also be liable for that same offence if he or she has ‘consented or connived’ in its commission. In that event, both the company and the officer will be guilty of the same offence and both subject to the same penalty.
How to protect your company
Australian companies, partnerships and joint ventures that have any connection to the UK should be concerned about the potential reach of the UK Bribery Act. They should be especially concerned if they conduct business or have operating investments in areas known for corruption, including Asia, Africa and emerging economies.
Freehills has extensive experience in acting for clients in these economies and in the application of anti-bribery legislation. We can assist in carrying out risk assessments, reviewing bribery policies and procedures, identifying ‘risky’ third party relationships and implementing adequate procedures to deal with the potential impact of the Bribery Act.