On 1 July, there came into force the UK Bribery Act, probably the world’s most ambitious and far-reaching anti-corruption law to date. The UK’s former anti-bribery laws, mostly dating from the turn of last century, were difficult to enforce against corporations and the UK had long been criticised by the Organisation for Economic Co-operation and Development (OECD) for not enforcing its obligations under the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
The Bribery Act abolished the old laws and created four new offences:
• Bribing—offering, promising or giving a financial or other advantage.
• Being bribed—requesting, agreeing to receive or accepting a financial or other advantage.
• Bribing foreign public officials.
• Failing to prevent bribery—known as the Corporate Offence.
Unlike the US Foreign Corrupt Practices Act, the Bribery Act criminalises public-sector and private-sector bribery, and creates no exception for facilitating (grease) payments.
It provides that a commercial organisation is guilty of a crime if a person associated with it bribes someone with the intention of obtaining or retaining either business or an advantage in the conduct of business for the organisation. The reasons why the offence is effecting change are:
1. It has great extra-territorial reach, applying not only to UK entities but also to corporations and partnerships, wherever incorporated or formed, that do business in the UK. While the Ministry of Justice has given some common-sense guidance on the meaning of “doing business” in the UK, it is not definitive and, ultimately, is for the courts to interpret.
Prosecutors have indicated they will seek a broad interpretation of the phrase and will prosecute non-UK firms that beat UK companies to business via bribery.
2. “Associated persons” is defined broadly as individuals or firms providing services for, or on behalf of, an organisation. They include employees, agents and subsidiaries that perform services for their parent companies, and the offence does not require that associated persons be connected to, or that the bribery occur in, the UK.
3. The offence is one of strict liability (no need to prove intent, negligence or fault). The only possible defence is proof that an organisation had “adequate procedures” in place to prevent associated persons from bribing. Minus such procedures, a firm may be prosecuted in the UK in relation to bribery of which it has no knowledge, and that is carried out wholly outside the UK by a person or persons with no connection to the UK.
In March, the Ministry of Justice released statutory guidance for procedures that commercial organisations can adopt to prevent those associated with them from bribing. The guidance provides that anti-bribery procedures should be informed by six principles:
1. Proportionality—procedures should be proportionate to the size of a business and the risks it faces.
2. Top-level commitment—senior management should foster an organisational culture in which bribery is unacceptable.
3. Risk assessment—commercial organisations should assess the nature and extent of their and their associated persons’ potential exposure to bribery.
4. Due diligence—organisations should evaluate associated persons who perform, or will perform, services on their behalf.
5. Communication and training.
6. Monitoring and review—programmes must identify and address new risks as they emerge.
Prudent firms are revisiting their compliance programmes to ensure that their procedures cover these principles so they can rely on the adequate procedures defence.
Even if a firm is not caught by the Corporate Offence, if it is an associated person, or potentially an associated person of a UK firm or a non-UK firm that conducts part of its business in the UK, it may find itself required to comply with the Bribery Act.
Since organisations do not want to be vicariously responsible for their associate’s bribery, they are employing a number of ways to ensure that their associates and potential associates comply with the Bribery Act, including contractual anti-bribery warranties and undertakings.
Firms soon are expected to realise that it makes good business sense to have effective compliance programmes and controls. Law firms are already seeing clients concerned about not only engaging persons or firms with a history of corrupt behaviour or with poor compliance controls, but also about investing in or buying such firms. Due diligence reviews in mergers and acquisitions now feature questions to identify Bribery Act issues. A lax attitude to compliance by a target firm may cause investors to demand onerous warranties and indemnity protection, or simply to walk away from a deal.