On July 1, 2011, the British Bribery Act 2010 (BBA) takes effect. The BBA, like the Foreign Corrupt Practices Act (FCPA), is extraterritorial, but unlike the FCPA, it bars improper payments to private parties as well as government officials. If you are a commercial organization with even a minimal presence in the United Kingdom (UK), be it through a satellite office or a single freelance contractor, you need to be aware of this change in the compliance landscape, and take steps to protect yourself. At Baker Hostetler we have been helping clients update their policies, practices and procedures to be compliant with the BBA and to take advantage of its defenses.
Like the FCPA, the BBA's jurisdiction is extraterritorial. This means that even companies with minimal contacts to the UK need to take precautions to avoid prosecution under the Act. Section 12 of the BBA states that the act applies not only to offenses that take place in the UK, but also to acts or omissions done outside of the UK, that would be considered offenses had they occurred in the UK, where the person involved in the act or omission has a "close connection" to the UK. The act provides a vague definition of when a person has a "close connection" to the UK. Recent guidance from the UK government suggests that merely having a subsidiary in the UK will not automatically subject a parent company to prosecution under the BBA. However, based on comments made by Richard Alderman of the Serious Fraud Office (SFO) and his senior counsel Vivian Robinson, it is reasonable to expect the SFO to prosecute offshore businesses in markets where British companies are competing. Only time will tell just how far the BBA's reach extends, but it is clear the SFO will attempt to "level the playing field" of international economic competition, and mitigate any disadvantage British companies who are BBA compliant may face in non-BBA compliant markets, by prosecuting their foreign competitors. So if you are competing with an important British company in South America, Asia or Africa, and have any connection to the United Kingdom, you may be subject to prosecution if you do things which are legal both in the country where they are done and in the United States.
Although the BBA resembles the FCPA it has three significant differences: (1) the BBA has a different, much broader, definition of bribery; (2) the BBA applies to both public and private individuals; and (3) the BBA creates a separate criminal offense for corporations failing to prevent bribery.
BRIBERY UNDER THE BBA
The BBA sets forth a seemingly all inclusive definition of bribery, criminalizing all inducements given or received for the purpose of gaining an advantage. Unlike the FCPA, the BBA does not differentiate between payments made to facilitate business in foreign markets and full on bribes. Nor is it necessary for a person to be involved with a government for the bribery to be criminal.
Section 1 provides two expansive scenarios to define the offense of bribery. Under Section 1, a person is guilty of bribery if they "offer, promise or give a financial or other advantage to another person, and [they] intend the advantage to induce a person to perform improperly a relevant function or activity, or to reward a person for the improper performance of such a function or activity." Alternatively, a person is guilty of bribery where they "offer, promise or give a financial or other advantage to another person, and [they] know or believe that the acceptance of the advantage would itself constitute the improper performance of a relevant function or activity."
A major criticism of the BBA is its definition of bribery, which is both incredibly broad and yet narrowly defined. Under this definition, it is unclear whether giving an advantage that does not induce improper performance is prohibited under the BBA. While it's apparent that the BBA's intent is to prevent behavior that results in an ill-obtained advantage, it remains to be seen how prosecutors will deal with the lack of clarity created by the language of the Act.
PUBLIC AND PRIVATE TRANSACTIONS
The second major distinction between the BBA and the FCPA is that the BBA's prohibition on bribery applies to both public and private individuals. The BBA casts a much wider net to include dealings between purely commercial entities. The BBA's jurisdiction over transactions wholly within the private sector is a considerable change from the FCPA. Companies would be wise to promptly update their current anti-bribery policies and training materials to reflect this change.
FAILING TO PREVENT BRIBERY
The last key difference between the FCPA and the BBA is that the BBA makes failing to prevent a bribe a separate criminal offense. Under Section 7 of the BBA, a "commercial organization is guilty of [failing to prevent bribery] if a person associated with the [organization] bribes another person intending to obtain or retain business for the [organization], or to obtain or retain an advantage in the conduct of business for [the organization]".
A commercial organization may be guilty of this strict liability offense even when the person engaging in bribery is only loosely associated with the company. Whether someone is associated with your organization will be based on the role they play or services they provide, rather than their official title or legal relationship. The guidance promulgated by the British government attempts to narrow the scope by suggesting that a person associated with a commercial organization who commits bribery will only trigger criminal liability for the company if they actually represent the company and the bribery is intended to benefit the company. Failing to train your employees, consultants or advisors on adherence to the BBA could have disastrous effects for the company.
The severity of this offense is tempered by the fact that the BBA offers a built-in defense. Section 7(2) makes having adequate procedures in place designed to prevent bribery an automatic defense to this strict liability offense. Companies can mitigate the effects of the BBA by having policies, practices and procedures designed to stop bribery before it occurs. This includes acknowledging the existence and importance of the BBA in the FCPA guidelines, as a start, and training all employees, advisors, consultants and contractors to avoid making payments intended to influence either public or private decision makers. The policies should be communicated early and often, and all employees should be trained to speak up if they encounter obstacles that make compliance with the BBA difficult in offshore markets. A company's ability to avail itself of this defense will also depend on whether it maintains thorough records of its commercial transactions, policies, training and other anti-bribery efforts.
As July 1st approaches, it is critical that you promptly amend your FCPA policy to address the BBA. While a strong FCPA policy will serve as a good foundation, your policy should be updated to ensure it effectively prevents bribery, allowing you to take advantage of the defense provided in the BBA. Baker Hostetler has advised you on the FCPA and we are here to assist you with the BBA. With the proper guidance, and a few effective enhancements, companies can leverage the expertise, time and money spent becoming FCPA compliant, to become BBA compliant.