The Bribery Bill received Royal Assent on 8 April 2010, becoming the Bribery Act 20101 (the Act). Whilst there is no set timeframe in the Act itself, the Ministry of Justice expects that the Act will come into force towards the end of 2010. This Client Alert gives an overview of the important changes to the law the Act will make.
Every company faces the risk either that its representatives will be bribed, or that they will attempt to bribe others. The Act aims to reform criminal liability for bribery and corruption, replacing existing common law and statutory offences with a new consolidated scheme of bribery offences. It is far-reaching. Its scope is worldwide, its potential defences as yet unclear and its sanctions include unlimited fines.
In addition, although the Act closely follows the requirements of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions2 in creating a separate offence of bribery of a foreign public official, it also brings bribery offences into purely private transactions (provided other elements are satisfied).
A significant new feature is that the Act makes it an offence for companies to fail to prevent bribery, unless they can prove their procedures for prevention are adequate. Every commercial organisation should therefore review its internal anti-bribery measures, and consider what steps it should take to protect itself from investigations or even prosecution.
This Client Alert highlights the key offences under the Act and eight noteworthy features which companies should consider, comments on how the Act’s international reach compares with US anti-corruption measures and recommends that companies consider how they can reduce the risk that they or someone associated with them will commit an offence.
The Offences and Territorial Application
The Act provides for two general types of offence: bribing and being bribed, and for two further specific offences of bribing a foreign public official and corporate failure to prevent bribery.
All the offences apply to behaviour taking place either inside the UK, or outside it provided the person has a "close connection" with the UK. A person has a "close connection" if they were at the relevant time among other things a British citizen, an individual ordinarily resident in the UK, or a body incorporated under the law of any part of the United Kingdom.
The key elements of the offences are as follows, and the principal common concepts behind them are set out below.
General Offence One: Bribing Another Person
A person P will be guilty of an offence where P offers, promises or gives a financial or other advantage to another person (whether directly or through a third party), and P either:
- Intends the advantage to induce that person or another to perform improperly a relevant function or activity, or to reward that person or another for improper performance; or
- Knows or believes that the acceptance of the advantage would in itself constitute the improper performance (by that person or another) of a function or activity.
General Offence Two: Being Bribed
A person R will be guilty of an offence where R either agrees to receive or accepts a financial or other advantage:
- 1. Intending that, in consequence, a relevant function or activity should be performed improperly;
- 2. Where this in itself constitutes improper performance; or
- 3. As a reward for improper performance.
Person R will also be guilty of an offence:
- 4. Where, in anticipation of R requesting, agreeing to receive or accepting a financial or other advantage, either R or another person at R’s request or with R’s assent or acquiescence performs improperly (whether or not the other person knows or believes the performance is improper).
In cases 2-4, it does not matter whether R knows or believes the performance is improper.
Functions or Activities, and Their Improper Performance
The "functions or activities" that may be affected by a proscribed bribe encompass a very wide range of behaviour.
They include not only public functions, but also to selected private functions, i.e. any activity either connected with a business, trade or profession, performed in the course of a person’s employment, or performed by or on behalf of a body of persons. The explanatory notes to the Bribery Bill made it clear that the purpose of this definition is to ensure that the law applies equally to public and private functions without discriminating between the two.
However, not all types of functions and activities are caught by the Act. The Act limits its application to functions or activities which are expected to be performed in good faith, or impartially, or by a person in a position of trust who is expected to act in a particular way. "Improper" performance is where the performance is in breach of the relevant expectation.
"Functions or activities" include behaviour anywhere in the world, even if it is unconnected with the UK. Furthermore, where the functions or activities performed are not subject to laws of the UK, any local custom or practice is to be disregarded, unless it is permitted or required by the written law (either judicial or legislative) of the country or territory concerned.
Offence Three: Bribery of a Foreign Public Official
The Act provides for a specific offence of bribery of a foreign public official, although to some extent this can be seen as a species of General Offence One.
In essence, P is guilty of an offence where P bribes a foreign public official F if P’s intention is to influence F and to obtain or retain business or a business advantage. The bribery must be an offer, promise or giving of financial or other advantage to F or to another at F’s request, assent or acquiescence, where F is neither permitted not required by the relevant written law to be so influenced.
Offence Four: Senior Officer Connivance
Where any of the above offences are committed by P or R with the "consent or connivance" of a senior officer (not necessarily a director) of a body corporate, or a person purporting to act in that capacity, both they and the body corporate will be guilty of the same offence as P or R.
However, where P or R commits the offence outside the UK, the senior officer and the body corporate will only be guilty if the senior officer has a close connection with the UK.
Offence Five: Corporate Failure to Prevent Bribery
The Act introduces a new offence targeted specifically at commercial organisations, of a different nature to the offences set out above. A relevant commercial organisation C is guilty of an offence if a person A "associated with" C bribes another person intending to obtain or retain for C business or a business advantage. This is the case even if A has no "close connection" with the UK (i.e. even where A has not committed a free-standing offence purely because A does not fall within the Act’s territorial application).
"Relevant commercial organisations" are either UK corporate bodies or partnerships carrying on business anywhere in the world; or foreign corporate bodies or partnerships carrying on business in the UK.
Person A will be "associated with" C if A performs services for or on behalf of C. Person A’s precise capacity does not matter, and A may be C’s employee, agent, or subsidiary.
This offence is strict liability, and does not depend on proof of C’s state of mind. However, the Act provides for one defence, namely "that C had in place adequate procedures designed to prevent persons associated with C from undertaking [the bribery]".
The Act does not specify what would constitute "adequate procedures". However, the Act obliges the Secretary of State to publish "guidance about procedures" that C can put into place to prevent A’s offence. The Ministry of Justice has indicated that the guidance will be published before the Act comes into force, although precisely how far in advance remains to be seen.
An individual committing an offence can be liable to imprisonment for up to 10 years. Both individuals and other persons can be liable to an unlimited fine.
The Act raises a number of difficult legal and practical issues which will require careful consideration by companies and individuals. The following issues are particularly noteworthy:
- Offences can arise from purely private transactions. It is not necessary to find a public or governmental element.
- Offences have very wide geographical scope — a UK citizen, resident or corporate entity appears sufficient to trigger application of the law.
- Foreign customs which are not permitted or required by written law — however legitimate they may be — cannot be taken into account.
- The relevant functions and activities (good faith, impartiality, positions of trust) are imprecisely drafted, and unless official guidance assists, the Act will require careful review of many forms of corporate conduct.
- Significantly, the Act distinguishes itself from other UK and English law on related topics (such as the Enterprise Act and the conspiracy to defraud) by not containing a "dishonesty" test. This is likely to significantly facilitate prosecutions. Also, many offences do not even require "improper" performance: for almost all, it is enough to offer, or agree to receive, the bribe. Last, many offences do not even require awareness of impropriety.
- It is possible for a corporate entity to commit the General Offences.
- There are severe personal consequences for senior officers where offences occur with their consent or connivance.
- The offence of corporate failure requires no corporate act, and the burden of proving the "adequate procedures" defence is on the company. This will be a difficult burden to meet in many cases, unless future guidance about procedures issued by the Secretary of State provides for "safe harbours".
Relationship With Anti-Corruption Laws in Other Jurisdictions
Once it comes into force, the Act’s significant international reach will mean that its operation will interact with the operation of laws of other jurisdictions. The US Foreign Corrupt Practices Act (FCPA) in particular has been given an increasingly broad and international reach by the US Department of Justice (USDOJ). The USDOJ has recently coupled a prosecution under the FCPA with charges related to private bribery, and may continue to broaden its enforcement reach in similar ways.
The USDOJ has also been increasingly focused on the prosecution under the FCPA of foreign subsidiaries of US companies and non-US companies for acts having little connection to the US, as well as the prosecution of companies for acts of third party agents and representatives. The Act, which has similar potential, should be considered alongside those significant anti-corruption enforcement efforts.
Much in the way the FCPA and the US Sentencing Guidelines have formed a benchmark for anti-corruption compliance efforts with regard to government officials and public companies, one may expect that the Act will influence compliance efforts at a global level in regard to private corruption. The Act appears to be stricter than the FCPA in certain areas, possibly including facilitation payments. The exact scope of this will depend on the availability of the Secretary of State guidance and "safe harbours".
The Act will be of significant concern for businesses, in particular those with large international reach. Not only is there a risk of the company committing an offence itself, there is obvious reputational damage and business disruption in cases where those associated with it are involved in bribery. Firms should review the Act carefully and ensure their worldwide internal systems and controls are adequate.