The UK's long-awaited Bribery Act 2010 (the Act) entered into force on 1 July 2011 and will significantly strengthen the UK's position on bribery and corruption. While it remains to be seen which business sectors are most likely to be investigated by the UK's Serious Fraud Office (the SFO), the body tasked with enforcing the Act, various commentators believe that the oil and gas industry appears to be at the top of the list.
The Act aims to target overseas corruption by organisations with a connection to the UK. Although the Act might not have quite the territorial reach of the US Foreign Corrupt Practices Act 1977 (FCPA), it will apply to all organisations based in the UK and overseas entities that carry out business in the UK.
The Act specifies four offences:
- the general offence of offering, promising or giving a bribe;
- the general offence of requesting or agreeing to receive a bribe;
- a separate offence of bribery of a foreign public official; and
- a new corporate offence of failing to prevent bribery.
The definition of what constitutes a bribe is extremely broad and covers any financial or other advantage offered (not just given) to someone to induce them to act improperly. A conviction for breaching the Act carries unlimited fines for businesses and up to ten years' imprisonment for individuals.
The offence of failing to prevent bribery is of particular note to international companies as it covers the activities of any person or third party acting on behalf of a business (for example, agents, distributors, consultants or other business partners) and affects not just UK incorporated businesses, but potentially the global operations of foreign businesses with a UK presence. The SFO has expressed a determination to enforce the Act internationally.
The principal defence available to companies is having “adequate procedures” in place to prevent bribery. “Adequate procedures” are not defined in the Act, however the UK Government has published guidance on what internal anti-bribery mechanisms are required to be put in place in order to establish the defence.
Many global businesses are familiar with the requirements of the FCPA and have put in place internal procedures to ensure that their policies and practices meet (or exceed) the requirements of the FCPA. However, the offences set out in the Bribery Act are not the same as those in the FCPA and compliance with the FCPA may not necessarily ensure compliance with the Act. The Act is more expansive than the FCPA in at least the following respects:
- the Act applies to bribery of private citizens as well as public officials;
- there is no defence for facilitation payments in the Act;
- the FCPA does not contain a close equivalent to the corporate offence for failing to prevent bribery, although it does include provisions relating to the keeping of books and records that accurately reflect business transactions and to the maintenance of effective internal controls, similar to corporate requirements in the UK; and
- there is no requirement to demonstrate “corrupt” intention under the Act.
Investigation of Oil and Gas Companies
Ernst & Young say that oil and gas is the most likely sector to be investigated by the SFO under the Act, followed by life sciences, consumer products, technology, real estate, automotive, telecommunications, asset management, banking and capital markets, and government and mining and metals. The list is based on the number of companies (and their sector) convicted of offences under the FCPA. Given the similarities between the FCPA and the Act and the close relationship between the SFO and the U.S. Department of Justice, Ernst & Young argues that the record for FCPA related investigations provides the best indicator as to where the SFO is likely to direct its investigations. There have been 118 FCPA investigations involving 242 companies of which the oil and gas sector companies make up to 18 percent.
The E&Y study reinforces a need for global energy companies to ensure that their compliance policies and procedures cover the enactment of the UK Bribery Act and that employees and third parties associated with the company are given clear guidance on how to comply with the Act.