The Bribery Act 2010
The Bribery Act 2010 (the Act) received Royal Assent on 8 April 2010 and is expected to be fully implemented sometime towards the end of the year. Current bribery laws are based on a combination of both statutory and common law offences, and are looked upon by many, as archaic and incoherent. Since 1998, when the UK signed up to the Organisation for Economic Co-operation and Development Convention on "Combating Bribery of Foreign Public Officials in International Business Transactions", it has been under pressure to codify the law governing this area. It is only now, through the Act that the UK will have a single codified system to tackle bribery and bribery related issues. As a result, companies need to consider the effects of the new wide-reaching provisions, in particular to the new strict corporate liability offence and the implications this will have on a wide array of national and foreign businesses.
This guidance note considers the ambit of the Act and suggests ways in which companies can safeguard themselves from falling foul of the new provisions.
What Are the 'Offences' Under the Act?
There are four main categories of offences: two general provisions relating to the offering of and the agreement to accept bribes; and two specific provisions relating to the bribing of foreign public officials, and most controversially, commercial organisation's failure to prevent bribery.
The General Provisions
- Paying bribes: it will be an offence to offer, promise, or give a financial or other advantage with the intention of inducing that person to "perform improperly" a "relevant function or activity" or to reward that person for doing so. (Section 1)
- Receiving bribes: it will be an offence to receive or accept a financial or other advantage intending that a "relevant function or activity" be performed "improperly". (Section 2)
These two provisions place specific emphasis on the "improper performance" of a "relevant function or activity", whilst previously, the emphasis was on the dishonest behaviour of individuals. This lowers the burden of proof which the prosecution has to meet in order for a person to be guilty of an offence.
The types of "function or activity" that can be "improperly performed" are those which are:
The person performing the activity must be expected to perform it in good faith or impartially or be in a position of trust. (Section 3)
"Improper performance" will be judged by whether it breached the expectation of what a reasonable person would expect in relation to the performance of the type of "function or activity" concerned (Section 5), of note, the "function or activity" need have no connection to the UK (Section 3(6)).
The various definitions are complex and widely drafted. The result of which may well be that more business activities fall within the ambit of the Act.
Penalties
An individual found guilty of paying or receiving bribes is liable:
- on summary conviction, to imprisonment for a term not exceeding 12 months, or to a fine not exceeding the statutory maximum (currently £5000), or both
- on conviction on indictment, to imprisonment for a term not exceeding 10 years, or to a fine, or both.
Any other person, or company, found guilty is liable:
- on summary conviction to a fine not exceeding the statutory minimum
- on conviction on indictment, to a fine. (Section 11)
Summary offences are offences which can be tried in the Magistrates Court (whether before a lay Magistrate or a District Judge) without a jury. An offence tried on indictment is before a jury in the Crown Court. The seriousness of the offence will dictate where the trial takes place.
Bribing Foreign Officials
The Act provides that it will be an offence if a person offers or gives a financial or other advantage to a foreign public official with the intention of influencing a foreign public official, whilst acting in their capacity as a foreign official, to obtain or retain business, or an advantage in the conduct of business. (Section 6)
This offence consists of two elements:
Unlike the general offences, there is no requirement for the foreign public official to perform their functions improperly. Therefore, a person can commit a Section 6 offence even if the foreign public official carries out their functions properly. So long as there is evidence of an intention to influence the decision of the foreign public official, there has been an offence. However, the test is narrower than that of the general offences due to the "business" requirement.
Penalties
The penalties for a breach of Section 6 are the same as those for the general offences referred to earlier.
Failure of Commercial Organisations to Prevent Bribery
This new offence, which provides for strict corporate liability, has caused the most controversy within commercial circles. The offence will be committed where:
- a person associated with a "relevant commercial organisation" bribes another person, ie commits one of the bribery offences referred to above, "intending to obtain or retain business or, [intends] to obtain or... an advantage in the conduct of business" and the "relevant commercial organisation" cannot show that it had "adequate procedures" in place to prevent bribes being paid.
Section 7(5) of the Act defines "relevant commercial organisation" broadly and includes:
- a body or partnership, incorporated or formed, under the law of the United Kingdom and which carries on business anywhere in the world
- any other body corporate or partnership, wherever incorporated or wherever formed, and which carries on business in the United Kingdom.
A person is associated with a commercial organisation if they perform services, in whatever capacity, for or on behalf of the organisation. This is again very wide in scope and includes employees, agents and subsidiaries. Under the current law, a company is likely to be guilty of a bribery offence only if very senior management or people holding sufficient responsibility within the organisation are involved (if they can be said to effectively act as the "corporate mind" of the company). Under this new offence, the organisation could be guilty even if no senior management knew of the offence being committed. Given the breadth of Section 7(5), it is feasible that a company or partnership could fall within the scope of the definition even if they carry out very little business in the United Kingdom.
Penalties
A person or company found guilty of a Section 7 offence is liable on conviction on indictment to a fine.
Defence of 'Adequate Procedures'?
Commercial organisations will have a defence to Section 7 if they can show that they have in place 'adequate procedures' designed to prevent persons associated with the organisation from carrying out acts of bribery.
The Act provides no definition as to what constitutes 'adequate procedures'. Section 9(1) states that the Secretary of State must publish guidance about the types of procedure that commercial organisations can put in place in order to have a Section 7 defence. Whilst the Government has indicated that guidance will be published prior to the Act coming into force, it has also stated that the guidance procedures should be used as exactly that, guidance. The Government will not be providing an exhaustive list of procedures that an organisation can put in place in order to protect themselves with 100% certainty. Therefore, it is vital that organisations do not simply implement standard procedures that other organisations may implement, but carry out its own risk assessment of the business to ascertain which areas may be vulnerable to corruption and where appropriate and rigorous measures must be implemented.
It will have to be left to the courts to decide whether the procedures put in place for the relevant business are 'adequate'.
Territorial Application
An offence will be committed in the UK in two circumstances:
- if any act or omission which forms part of the offence takes place in the UK or
- if the act or omission takes place outside the UK, but the person's act or omission which forms part of the offence would a) constitute an offence if carried in the UK and b) the person carrying out the offence has a "close connection" with the UK.
A person has a "close connection" with the UK if they are any of the following:
- a British citizen, a British overseas territories citizen, a British National (Overseas) or, a British Overseas citizen
- a person who under the British Nationality Act 1981 was a British subject, a British protected person or, an individual ordinarily resident in the United Kingdom
As the above illustrates, the territorial application of the Act is extremely wide. The offence may be prosecuted if done by a British national or corporate or by a person who is ordinarily resident in the UK regardless of whether the act or omission took place outside the UK. In addition, the corporate criminal offence will apply to commercial organisations which have a business presence in the UK. For example, foreign companies would be liable if their UK subsidiaries carried out an act of bribery. The place where the bribe took place would be irrelevant; the fact that the foreign company had UK subsidiaries would be enough to bring the foreign company within the scope of the Act. It is important that foreign companies, which have a presence in the UK, ensure that they abide by the Act as well as their own national anti-bribery and corruption laws.
Other Key Issues
Facilitation Payments
Facilitation payments are payments of small amounts of money made to individuals in order for that individual to perform their duties more effectively. For example, a construction company pays an individual in order for them to process a planning permission application more quickly.
Whilst the Act does not specifically mention facilitation payments, such payments will be illegal as they may fall within the ambit of the general and/or specific offences. This is different to the United States where some facilitation payments are acceptable under the Foreign Corrupt Practices Act 1977.
In reality, facilitation payments are part of business practice in many jurisdictions, and many jurisdictions allow for such payments by law. The Government has stated that the prosecution of such conduct will be at the discretion of the prosecution and will depend heavily on the issue of public policy. However, if a company has concerns about the legality of certain payments, then the Serious Fraud Office (SFO) indicated that it would welcome consultation from companies on specific matters and will give guidance.
Provision of Hospitality
As with facilitation payments, the Act does not provide specific provisions which govern the provision of hospitality, but, depending on the type and nature of the hospitality involved, it could fall within the general and/or specific provisions.
As above, the prosecution will have discretion in prosecuting a case based on public policy considerations. The Government has stated that it does not wish to prevent or punish genuine hospitality. However, the risk of prosecution will depend on the nature and proportionality of the hospitality.
Steps to Take
- Take a top-down approach to bribery. Board members need to take responsibility for establishing a culture which makes it clear that bribery and corruption is unacceptable. This message needs to be communicated down to the lowest levels of the organisation.
- Implement a clear and unambiguous anti-bribery and anti-corruption compliance policy. This should be circulated to all members of the organisations as well as third parties who carry out business on behalf of the organisation. Implement training to staff.
- Form an anti-bribery and anti-corruption committee made up of members of staff throughout the organisation, from senior executives to lower level employees.
- Put a system in place which a) allows staff to report suspect behaviour, and b) provides a response in order to deal with such reports. This should include forms of risk based due diligence.
- Carry out third party due diligence which specifically focuses on aspects of bribery and corruption, especially in relation to agents and distributors. This should involve either seeing audited documents of the third party organisation, or include the right to audit the third party organisation when entering into a contract with them. Senior management should remember that if a third party agent wins business for the organisation by way of bribes, the organisation itself can be liable for the agent's conduct.
Is Any Guidance Available at the Present Time?
Guidance on anti-corruption procedures are available from the following sources:
- Transparency International: www.transparency.org
- Global Infrastructure Anti-Corruption Centre: www.giaccentre.org
Comment by Antonio Suarez-Martinez
Associate, Commercial Litigation Group (London)
Whilst the Bribery Act 2010 should be welcomed for codifying an area of law that was previously complex and outdated, it does not come without criticism.
The offences under the Act are extremely wide and encompass certain types of behaviour which some may not consider criminal. Many industries believe facilitation payments and hospitality to be part of normal business practice, but under the Act they could constitute an offence. Furthermore, neither facilitation payments nor hospitality are defined, and the prosecution has discretion in deciding whether to prosecute a company. This leads to further ambiguity and poses the question of whether UK companies will be as competitive in worldwide markets.
The application of the Act is so wide that companies can be liable for the conduct of third parties, such as agents, distributors and subsidiaries, and so be liable for conduct over which they have no control. As a result, the Act succeeds in bringing the UK into line with international anti-bribery and anti-corruption standards. However, some suggest the measures are over and beyond what is necessary, with a company only needing part of its business to be carried out in the UK for it to be within the Act's jurisdiction. The Act does not define what constitutes 'part of', but it seems that very little will be needed to constitute this.
A key provision for commercial organisations is the 'adequate procedures' defence. This defence is not defined under the Act and, at the date of the publication of this article, no governmental guidelines had been produced. Nevertheless, companies and individuals must not wait until guidelines are produced to put procedures in place. Despite the Act being expected to come into force later this year, companies should immediately begin the process of risk assessments in order to ensure that adequate anti-corruption and anti-bribery procedures are in place by the time the Act is implemented.
Contacts
The information in this newsletter is for general guidance only and is not intended to be a substitute for specific legal advice. If you would like any further information please contact:
James Maton
Partner, Commercial Litigation Group (London)
t: +44 (0) 20 7556 4547
e: JMaton@eapdlaw.com
Antonio Suarez-Martinez
Associate, Commercial Litigation Group (London)
t: +44 (0) 20 7556 4526
e: ASuarez-Martinez@eapdlaw.com
