Last week the Financial Times reported that the Government was considering a review of the Bribery Act (“the Act”) to clarify confusion over facilitation payments. The FT notes that small and medium-sized businesses had complained that the cost of compliance was too high and they were unsure over what appropriate adequate procedures should be put in place. It quotes a summary of a high-level Government “Star Chamber” meeting that: “Businesses were unsure what adequate procedures they would need to demonstrate, to ensure that they would not be prosecuted unfairly for using facilitation payments, which are often needed when expanding abroad.” The proposed review appears to follow on from a recent report by the House of Lords Select Committee on Small and Medium Sized Enterprises, which we reported here, which called for post-legislative scrutiny of the Bribery Act by a Select Committee.
The FT also quotes a government spokesperson, who stated that: “The MoJ and BIS are working with small businesses to ensure they “understand the requirements and only put in proportionate measures to comply… The government is clear that the Bribery Act and its associated guidance should not impose unnecessary costs or burdensome procedures on legitimate business.”
The summary from the Star Chamber meeting is concerning as it starts from the position that facilitation payments are “often needed”, an implicit and unhelpful acceptance that bribery is a necessary evil when conducting business abroad. It sends the business community mixed messages and undermines the Serious Fraud Office’s statement of policy towards facilitation payments in October 2012 that they are illegal and will be prosecuted if in the public interest to do so. Whilst the quote from the Government source suggests that the focus is on SMEs understanding the existing rules rather than seeking to rewrite them, care needs to be taken not to provide companies with a false sense of security over matters such as facilitation payments, when the prosecutorial body on the other hand is seeking to discourage their use.
Despite the uncertainty over what, if anything, the Government is intending to review, revision at this stage seems unnecessary. It would be premature to review the legislation until it has time to bed-in. After all, there have only been three low-level prosecutions. Facilitation payments have always been criminalised; their prohibition is not a new development. The SFO made this clear in October 2012, as reported here. The fact is facilitation payments, even if initially made at a very low level, have the ability to corrupt absolutely. Separately, the Ministry of Justice has produced Guidance in March 2011 that provides a broad framework for understanding what adequate procedures should be put in place to prevent bribery, including facilitation payments. They are deliberately not prescriptive and companies should take proportionate measures. Steps to introduce more prescriptive measures are destined to make the Act unworkable, as it is not possible to account for every type of situation.
However, it is unsurprising that there is desire for some clarification concerning some aspects of the Act in the absence of detailed judicial consideration of its terms in the context of a prosecution. Corporate hospitality remains an issue. In respect of gift and hospitality, one respondent to the House of Lords Select Committee dramatically commented that: “You cannot really take someone out to dinner without committing a crime.” Although such a statement is over zealous because the MoJ Guidance states that “reasonable and proportionate hospitality” is not prohibited, it is felt greater clarity is required in this area. However, this suggests that better communication is required; not a change in the law.
Perhaps the main gripe made by the UK business community concerning facilitation payments is that they are not criminalised in the US under the Foreign Corrupt Practices Act. It is argued that UK businesses are put at a disadvantage to their US competitors. For companies with a US and UK presence it can provide other challenges especially when trying to prepare a uniform compliance programme in compliance with UK and US anti-corruption laws. The reality however is that many US companies prohibit the use of facilitation payments as part of their business culture because: (1) the exception under the FCPA can and has been narrowly construed; (2) a US Department of Justice and Security and Exchange Commission's resource guide expresses disapproval of facilitation payments and notes that the United States "encourage[s] companies to prohibit or discourage facilitating payments”; and (3) facilitation payments may be unlawful in the country where they are made and other countries’ anti-bribery laws such as the UK.
While efforts to improve understanding are desirable, the Act itself is robust and fit for purpose and tinkering has the potential to undermine its eventual impact; a point that Robert Barrington at Transparency International forcefully makes in his recent article of last week. Rather than make the interpretation of the Act confusing for companies by attempting to rewrite it or decriminalise facilitation payments, a more fruitful use of the Government’s resources would be to encourage business groups, civil society, law firms and prosecuting agencies, principally the Serious Fraud Office, to help the Government develop and make available to UK plc further guidance on those areas of the Act that require further clarification such as corporate hospitality. Watering down the Act, legislation of which we should be proud and which took such enormous time and effort to create and enact, may have the unintended consequence of pulling up the budding UK anti-corruption effort at its roots, rather than seeing it blossom.