Facilitation payments, Russia, Your Questions: Answered - Written by on Wednesday, May 11, 2011 5:24 - 0 Comments

Ask Barry & Richard: From Russia with love – Senior officer liability & UK Director of Russian company

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Question

Please could you tell me the answer to this hypothetical.

I have a friend who is a non-executive Director of a Russian company which has no UK links whatsoever. The Russian company only conducts business in Russia.

The Managing Director of the Russian company, who is Russian, makes facilitation payments to secure a large contract in Russia – which would be offences under sections 1 & 6.

A UK exporter, which was bidding for the Russian contract, loses out and tips off the SFO, complaining that UK Inc is losing out because of the Bribery Act. The SFO is sympathetic. The Russian company cannot however be prosecuted, since it has no UK connections and neither does the MD.

The Russian company has, on its board, a UK national non-executive director. The UK national is not a controlling mind. He did not know anything about this particular bribe. However, he knows that the Managing Director is notorious for paying bribes. The SFO concludes he clearly connived. The SFO wants to prosecute.

Can the UK national be prosecuted under section 14? Do the UK courts have jurisdiction?

To pin down the question in more concrete terms: can a senior officer with the requisite close connection to the UK be prosecuted under section 14 for consenting to offences committed abroad by a foreign company which has no close connections with the UK?

Answer

Thanks for this question.  For the benefit of the readers we’ll work through the whole question.  In summary based on the assumptions in the hypothetical then the non-executive director could not be succesfully prosecuted.  But, there are two cautionary points which we’ll deal with when we’ve worked it through.

As you say, on the assumption that the Russian Company does not carry on business in the UK it cannot be successfully prosecuted in the UK for failure to prevent bribery under Section 7.

Nor can the Russian Company nor the Russian Managing  Director be prosecuted in the UK connection under Section 1 or 6 for two reasons:

First, in the words of the statute – as “no act or omission which forms part of the offence takes place in that part of the United Kingdom” the Russian Company cannot be prosecuted under Sections 1 or 6 (bribing) (Section 12 (1)).

Second, while Section 12(2) of the Bribery creates world wide jurisdiction for offences which take place outside of the UK the Bribery Act only has jurisdiction if under Section 12(2)(c) that person has a “close connection” with the United Kingdom.  What constitutes a close connection is listed in Section 12(4).  Neither the Russian company nor the Russian Managing Director meet any of these criteria in the hypothetical.

The UK national non-executive does meet these criteria but he “is not a controlling mind. He did not know anything about this particular bribe”.

As a result he is not in violation of Sections 1 or 6 directly.  You raise the question of Section 14.

Importantly a pre-requisite for a successful prosecution under Section 14 includes an offence under section 1, 2 or 6 having been committed by a body corporate or a Scottish partnership.  For the reasons set out above, the Russian company cannot be successfully prosecuted under Section 1 or 6 (there is no suggestion Section 2 – receiving a bribe is in play).  As a result the Non Executive Director cannot be successfully prosecuted using Section 14 since one of its key ingredients is missing.

Words of Caution

First, evidence.  These types of cases will be determined by reference to inference.  We anticipate that it is likely to be an uphill battle to convince a court that a director of a company is not a controlling mind.  This could create potential problems.  You do not say if the UK national non-executive director lives or spends time in the UK.  If he/she does then this may put into doubt the assumption that the Russian company does not in fact have a connection with the UK and fall within its jurisdiction.

Second, practical. As you say the SFO is sympathetic.  This is in line with various conversations we have had with Richard Alderman (the Director of the SFO), Vivian Robinson QC (the GC) and others.  However, you should be aware that this is exactly the type of situation where the SFO have told us that if it can make a case which was to founder on a jurisdictional point it would, in the hope that the Russian company would engage with the process rather than face the embarassment of avoidance.

That said and noting the signalled aggressive approach, we think the jurisdictional issue (subject to our first caveat(!)) here is too great and the SFO would find it difficult to make a case that was credible.

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