Domestic bribery: legal framework
The Bribery Act contains three offences applicable to domestic bribery in both the public and private sectors:
- bribing another person (Section 1);
- receiving a bribe (Section 2); and
- the corporate offence of failure to prevent bribery (Section 7).
These offences all apply equally to foreign and domestic bribery. The key features of the main Bribery Act offences, along with the rules applicable to corporate liability and jurisdiction, are covered in detail in Section IV.
The Bribery Act applies to conduct occurring on or after 1 July 2011; conduct occurring prior to this date is prosecuted under pre-existing laws dating back to the turn of the 20th century.3 The maximum penalties for Bribery Act offences are the same for domestic and foreign bribery: for corporates an unlimited fine, and for individuals a maximum sentence of 10 years' imprisonment or an unlimited fine, or both.4 Under pre-existing bribery laws, the maximum sentence available is seven years' imprisonment or an unlimited fine, or both.5
Foreign bribery: legal framework
Both UK and foreign corporates must be alive to the broad jurisdictional reach of the Bribery Act. The introduction of the Section 7 'failure to prevent bribery' offence provides a quasi-strict liability route to corporate liability and, critically, extends jurisdictional reach to foreign-incorporated companies that conduct part of their business in the United Kingdom (even in circumstances where all the relevant features of the corrupt conduct occurred outside the United Kingdom).i What offences and defences are applicable to foreign bribery?
The Bribery Act contains one offence specifically targeted at foreign bribery: the offence of bribing a foreign public official (Section 6). Sections 1, 2 and 7 also apply to foreign bribery and provide broad coverage of both public and private overseas corruption.
Section 1 and Section 6 both concern, directly or through a third party, the offer, promise or giving of any financial or other advantage with a specified intention. The key difference is that for Section 1 the briber's intention must relate to inducing or rewarding the 'improper performance' of a relevant function or activity (by a private person or public official), whereas under Section 6 the intention need only be to influence an official in their capacity as a foreign public official (while intending to obtain or retain business or a business advantage).10 This reflects the impropriety of public officials receiving additional benefits at all as a result of their official position.
Under Section 7, a commercial organisation (i.e., a company or partnership – the offence is not applicable to natural persons) is guilty of an offence where it can be shown that a person associated11 with the company (e.g., an employee, agent or subsidiary) bribes another person intending to obtain or retain business or a business advantage for the company.12 The unique jurisdictional and corporate liability features of this offence are discussed further in Subsections (ii) and (iii) below. A defence is available to the Section 7 offence if it can be shown that the organisation had in place adequate procedures designed to prevent bribery. UK guidance on what qualifies as adequate procedures is covered in Section X.Are payments through third party intermediaries caught under the Bribery Act?
Payments via third parties still result in liability under the Bribery Act – both the instigator and the intermediary will be guilty of the relevant offence under Section 1 or 6 if they have the requisite intent.
Notably, under Section 7, a bribe paid by an intermediary results in the company being liable if the intermediary performs services for or on behalf of the company and bribes another person with an intention to obtain or retain business or a business advantage for the company. This may result in a company being held liable in circumstances where no company employee intended that a bribe be paid or was aware of the intermediary's corrupt actions. Liability may arise even where an intermediary is explicitly instructed not to act corruptly if adequate procedures to prevent corruption were not in place. This only goes to reinforce the importance of implementing appropriate due diligence and compliance procedures when engaging agents or other intermediaries for organisations falling within the jurisdiction of the Bribery Act (see Section X for further detail).ii In what circumstances can a company be liable for foreign bribery?
The general laws of corporate liability in England and Wales rely on the 'identification principle', under which a corporation can only be liable for a criminal offence if a 'directing mind and will' of the company (i.e., a very senior individual or group of individuals) has committed the offence in question.13 These requirements apply if a corporation is to be convicted of offences under Sections 1, 2 and 6 of the Bribery Act, or under the previous law.
Section 7 sidesteps the difficulties of the identification principle and provides prosecutors with an easier route to corporate liability. There is no requirement for the offence to have been committed by senior management and liability can flow from the corrupt act of any associated person, however junior or remote to senior management. Section 7 thus imputes corporate liability for bribery by low-level employees, as well as third parties who provide services for or on behalf of the company.iii The broad extraterritorial jurisdiction of the Bribery Act
The jurisdictional reach of Sections 1 and 6 Bribery Act, which can be used to prosecute individuals as well as companies (subject to the identification principle), is wide and can apply to actions taken entirely outside the United Kingdom if the person committing the offence has a close connection with the United Kingdom (covering British citizens, individuals ordinarily resident in the United Kingdom and UK companies).
The extraterritorial reach of Section 7 is broader still. The Section 7 offence applies to a 'relevant commercial organisation', which includes, in addition to a UK company or partnership, any other body corporate (wherever incorporated)14 that 'carries on a business, or part of a business' in the United Kingdom.15 Provided an organisation falls within the definition of a 'relevant commercial organisation', UK jurisdiction will apply regardless of whether the acts relevant to the corruption offence take place entirely abroad.16 The Ministry of Justice (MoJ) set out the intention of the approach as being able to catch 'a bribe paid in Sweden, by a Philippine national on behalf of a Brazilian engineering company, that carries on a lift maintenance business in the United Kingdom, in respect of a contract relating to an infrastructure project in New Zealand'.17
In light of the above, foreign corporates should consider whether they could be viewed as 'carrying on a business or part of a business' in the United Kingdom. Whether a foreign company can be regarded as carrying on a business or part of a business in the United Kingdom is to be answered by applying a 'common sense approach'.18 There has been a general dearth of case law in interpreting the meaning of this phrase, but it is generally accepted that this will depend on the extent to which a foreign company exercises control over its UK subsidiary or business.19iv Facilitation payments and gifts and entertainment
Facilitation payments are considered bribes under the Bribery Act. UK government guidance does recognise the problems that certain organisations will face in parts of the world where facilitation payments are common and prosecutorial discretion will apply in determining whether it is in the public interest to prosecute facilitation payment offences.20
With respect to gifts and entertainment, MoJ guidance states 'rest assured – no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix'.21 Bona fide hospitality, promotional and other business expenditure that seeks to improve a company's image, better present products and services or establish cordial relations is 'recognised as an established and important part of doing business'. However, disproportionate gifts and entertainment can be considered bribes. Guidance indicates that the more lavish the hospitality and the higher the expenditure on travel, accommodation and other business expenditures, the greater the inference that it is intended to influence a person to grant business in return.22