On March 30, 2011, the United Kingdom’s Ministry of Justice published its long-awaited official Guidance for the Bribery Act 2010. The Guidance indicates that the Bribery Act, which was originally scheduled to take effect in April, will instead take effect on July 1, 2011.
While the Guidance does not have the force of law and can be revised at any time, it provides key insight into how the Ministry of Justice intends for the Bribery Act to be implemented. In its introductory section, the Secretary of State for the Ministry of Justice, Kenneth Clarke, seeks to reassure the business community that the Bribery Act is “directed at making life difficult for the mavericks responsible for corruption” and is not meant to “unduly burden the vast majority of decent, law-abiding firms.” He further states that the “core principle” set forth in the Guidance is “proportionality” and that the Ministry of Justice is committed to implementing the act in a “workable way,” particularly for “small firms that have limited resources.”
The Guidance does provide clarification on several key areas of concern for businesses, such as UK regulators’ view of gifts and hospitality for foreign officials and the definition of an “associated person” who can trigger liability by committing bribery on a business organization’s behalf. With respect to other questions, however, such as UK regulators’ view of the statute’s extraterritorial application to non-UK businesses, much is left to future development of the law through the UK’s courts and through the Ministry’s approach in particular cases.
Key take-aways from the Guidance include the following:
- Corporate Liability and the “Associated” Persons Question. Under the Bribery Act, a business organization (or “commercial organisation” in the parlance of the UK law) can be liable for bribery under two scenarios. The first is if a high-level person within the organization commits the offense on behalf of the organization. In this scenario, under UK principles, the organization “itself commits the offence by virtue of the common law ‘identification’ principle.” This principle, which stems from background UK common law and is not specific to the Bribery Act, is a narrower version of corporate criminal liability than exists under U.S. common law, since corporate liability is only triggered by conduct of an individual who is “the directing mind or will of the organization.”
The second scenario triggering corporate liability under the Bribery Act, however, is if an “associated person” – defined to include anyone who “performs services” for or on behalf of the corporation – engages in bribery intended to benefit the corporation.1 This provision appears to render the scope of corporate liability, for purposes of the Bribery Act, as broad as corporate criminal liability under U.S. common law, and could sweep even more broadly. First, employees, agents, and subsidiaries of a business organization are deemed to be “associated persons” whose conduct can trigger corporate liability. In addition, the Guidance acknowledges that the term’s “broad scope” could even include contractors, suppliers, employees of a business organization’s subsidiary, and others, depending on whether the third party can be deemed to be performing services for the business organization. This question is to be judged on the “relevant circumstances”; liability will not automatically attach based on corporate ownership, investment or the existence of a contract. In all such cases, corporate liability is triggered only if the associated person intended to benefit the business organization. Where the association is more distant, this may prove an obstacle to liability for the business organization: for example, the Guidance notes that bribery by an employee of a subsidiary will not automatically trigger liability for the parent corporation. The subsidiary’s employee must have intended to obtain or retain business for the parent; nor will liability accrue merely because the parent benefited indirectly from the bribe.
- Extraterritorial Jurisdiction. The Bribery Act applies to any corporation or partnership incorporated or formed in the United Kingdom, along with any corporation which “carries on a business or part of a business in the UK.” The question of when a non-UK corporation may be prosecuted by UK authorities for conduct that itself has no jurisdictional nexus to the UK – for the Bribery Act does not require such a nexus – has been of great concern. The Guidance provides only a limited answer to this question. On the one hand, the Guidance states that a non-UK business will not necessarily be subject to the Bribery Act if its sole connection to the United Kingdom is the fact that its securities are listed on the London Stock Exchange, or because it has a subsidiary in the United Kingdom. On the other hand, the Guidance states that the Ministry will take a “common sense approach” to jurisdiction, and that “the courts will be the final arbiter as to whether an organization ‘carries on a business’ in the UK.”
- Hospitality Expenditures. Unlike the Foreign Corrupt Practices Act (“FCPA”) in the United States, the Bribery Act does not contain an express exception or defense for reasonable gifts and hospitality for foreign officials. Nonetheless, the Guidance states that in the Ministry’s view, the statute permits “reasonable and proportionate corporate hospitality and promotional” expenditures which seek to “improve the image” of a corporation, “better present products and services, or establish cordial relations.” For example, a corporation may treat a foreign public official to a sporting event or meal, or even cover travel and hotel costs for a site visit, provided that such expenditures are reasonable and proportionate to the corporation’s business and to industry standards.
- Definition of “Foreign Public Official.” A foreign public official will include appointed and elected officials who hold a “legislative, administrative or judicial position of any kind” in a foreign government, as well as any person who “performs public functions” in any branch of the government or for any “public agency or public enterprise.” The Guidance specifies that this definition encompasses, for example, “professionals working for public health agencies and officers exercising public functions in state-owned enterprises.” This language may indicate that the Ministry will take a slightly narrower view than the U.S. Department of Justice does with respect to employees of state-owned enterprises – the DOJ views any employee of a state-owned enterprise as a public official – but if so it may be a distinction without a difference given the examples provided in the Guidance. It appears likely that an employee with the ability to influence decisions of a state-owned enterprise would be deemed to be exercising a public function. In addition, the law considers officials or agents of public international organizations, such as the United Nations or the World Bank, to be “foreign public officials” for the purposes of the Bribery Act.
- Facilitation Payments. There is no exemption for facilitation payments under the Bribery Act. The only potential exception is very narrow: the Guidance indicates that the common law defense of duress is “very likely” to be available in circumstances where individuals are left with no alternative but to make such payments to protect against loss of “life, limb or liberty.” This represents a marked difference from the FCPA, which does provide an exemption for facilitation payments.
The Guidance also sets forth six principles that the Ministry of Justice will look to when determining whether a corporation has instituted anti-bribery procedures sufficient to qualify for the Bribery Act’s affirmative defense to allegations of bribery.2 These principles are:
- Proportionate Procedures – A corporation’s anti-bribery procedures should be proportionate to its bribery risks and to the nature, scale and complexity of the corporation’s operations.
- Top-Level Commitment – The top-level management of a corporation must be committed to preventing bribery and fostering a culture where bribery is unacceptable.
- Risk Assessment – A corporation must conduct an informed assessment of the nature and extent of potential bribery risks on a regular basis, and document its efforts.
- Due Diligence – A corporation should apply proportionate due diligence procedures in order to mitigate identified bribery risks.
- Communication – A corporation must communicate its bribery prevention policies and procedures to its members, including through training, in a manner that is proportionate to its bribery risks.
- Monitoring and Review – A corporation must monitor and review its anti-bribery procedures, and make improvements where necessary.
The Ministry of Justice published 11 case studies as “Appendix A” to the Guidance to illustrate how these principles will be applied in a variety of circumstances, although these case studies are not technically part of the Guidance and are not binding on the Ministry.
In addition, the Director of the Serious Fraud Office and the Director of Public Prosecutions simultaneously published separate Bribery Act guidance for prosecutors. The guidance is in line with the Ministry of Justice’s Guidance on all key points, including hospitality – noting that “reasonable, proportionate” hospitality and promotional expenditures “made in good faith [as] an established and important part of doing  business” will not be considered a violation of the Bribery Act – and on facilitation payments, which the guidance reiterates are illegal. The prosecutors’ guidance also sets forth the following three factors which will tend against prosecution: (1) if the court is likely to impose only a “nominal penalty,” (2) if the harm was “minor and was the result of a single incident,” and (3) if a corporation has taken a “genuinely proactive approach of self-reporting and remedial action.”3
The Ministry of Justice’s Guidance can be found here: http://www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf
The Serious Fraud Office’s guidance for prosecutors can be found here: http://www.sfo.gov.uk/press-room/latest-press-releases/pressreleases2011/bribery-act-prosecution-guidancepublished.aspx