US Foreign Corrupt Practices Act & Dodd Frank - Written by on Wednesday, June 29, 2011 23:09 - 2 Comments

The Bribery Act – Foreign public officials & why you should care who they are

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Can you work out who in the picture is a foreign public official working for a state owned enterprise?

In certain circumstances, some companies take the view they all are.

The question of who exactly is a foreign public official generates a lot of discussion.

The issue tends to manifest in two ways, Country and Sector.

Certain countries will contain many publicly owned businesses. For example, some corporations take the view that there is strong likelihood that local partners in China may constitute a public official.  As a result they err on the side of caution and treat all local partners they deal with in that jurisdiction as state owned enterprises and the people they work for as foreign public officials.

Certain sectors will deal heavily with people falling within the ambit of a public official. Doctors working within a national health service outside the UK are an example of this and create increased risks for medical businesses who will often sell to them globally.

In both examples, initial images conjured up of government workers in ministries fall wide of the mark.

The US

The question is a vexed one in the United States where the equivalent law to the Bribery Act, the Foreign and Corrupt Practices Act (FCPA), only covers government bribery.

While there are other US Laws which can and do capture private sector bribery there is a sense that the DOJ focus is principally targeted at government bribery. As a result the definition of who is a public official is an important question.

The DOJ has taken a fairly expansive view – hence the China example above.

The UK

The UK Bribery Act covers both government and commercial bribery and as a result the question is less of an issue – though it remains important since the threshold to get over to prove a bribe in relation to the specific bribery of a foreign public official offence is much lower than in the case of the other bribery offences (which capture all bribery including commercial and government).

Broadly, assuming that there is some form of advantage (financial or otherwise in the mix) all that is required to prove bribery of a foreign public official under the Bribery Act is an element of influence in relation to the foreign public official.

There is no requirement in the statute for impropriety when dealing with foreign public official offences.

While the government guidance has sought to provide comfort around this, essentially promising that a real world and practical approach will be taken, the fact remains the legal standard is low.

Organisations worry.

In view of this it is important to consider exactly who it is that an organisation is dealing with.

Against that backdrop last week Richard Alderman provided some clarity around the SFO view of who the SFO view as a public official. He said:

“A related question is whether or not this is actually private sector to private sector when the person working for the other company is working for a State controlled enterprise. Is that person a foreign public official? If he or she is, then there is a different test. We are not looking for improper inducement, but an attempt to influence.

Who then is a foreign public official? This is the subject of litigation at the moment in the US and I am following this with interest. The test I use is one that was set out by the OECD in the commentary on the OECD Convention. What we look at is whether or not the foreign State is in a position to influence the foreign company. We therefore look at the relationship between the company and the State to see whether effectively this commercial organisation is being run by the State.

This can lead us into some tricky areas. We have received questions about banking officials in countries where the State has a very major interest in the Bank and exercises that interest very actively. Are those officials foreign public officials?

Our view is that in those circumstances the individual is likely to be a foreign public official. On the other hand if the State has a major interest but does not control the operations of the Bank, then I think we could have a different situation.”

The SFO Director appears to draw the distinction of state control not just a question of ownership.

Assuming this is so we agree with the analysis. Any other view would create a compliance nightmare for business and make a mockery of the UK government’s statements on the practical and fair enforcement approach in relation to the new law.

A few words of caution, while a states major interest in a bank does not necessarily mean that the organisation is a state owned enterprise, if the definition is one of control, then a minority interest may not always indicate an organisation is privately owned.  Control and ownership can are different concepts and control could, for example, be imposed by contract.

 

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Ethics and Compliance Weekly Roundup | i-Sight Investigation Software Blog
Jul 1, 2011 5:02

[...] The Bribery Act – Foreign public officials & why you should care who they are by Barry Vitou and Richard Kovalevsky Q.C. [...]

Compliance Bits and Pieces for July 1 | Compliance Building
Jul 1, 2011 5:09

[...] The Bribery Act – Foreign public officials & why you should care who they are [...]

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