Your Questions: Answered - Written by Barry & Richard on Thursday, November 24, 2011 17:06 - 0 Comments
What is the liability of a UK parent for the conduct of a Russian subsidiary?
Do I understand correctly that an offence is committed by UK corporation under Section 6 of the UKBA if any act, which forms part of the offence, takes place in the UK? In other words, if Russian subsidiary of the UK corporation gives bribe to Russian official without any instruction from UK parent company, there is no offence under Section 6 for UK parent company, but offence under Section 7.
Thank you in advance.
From a reader in Moscow, Russia.
Thank you for this very good question. It is best dealt with in its component parts.
Q. “An offence is committed by UK corporation under Section 6 of the UKBA if any act, which forms part of the offence, takes place in the UK?”
A. This is correct. Importantly, a UK corporation is also guilty of an offence under Section 6 for its worldwide conduct as it has a close connection to the UK. A Russian company does not have a close connection so can only commit an offence under Section 6 if the offence takes place in the UK.
Q. “if Russian subsidiary of the UK corporation gives bribe to Russian official without any instruction from UK parent company, there is no offence under Section 6 for UK parent company, but offence under Section 7.”
A. Assuming that “without instruction” means absolutely no knowledge AND that the UK company had put in Adequate Procedures to prevent bribery for the defence under Section 7 then broadly speaking it is almost impossible to see how the UK prosecutor could say that the “controlling mind” of the UK company knew what was going on in order to prosecute. A key test for prosecuting a corporate under Sections 1, 2 or 6 is that the controlling mind of the Company knows what is going on.
We make the reference to the Adequate Procedures to prevent bribery and say “broadly speaking” because the Serious Fraud Office has said that if a company does not have Adequate Procedures to prevent bribery THEN the SFO will (in appropriate cases) argue that the UK Board turned a blind eye to the risk and argue that the UK company is liable in this way.
Put another way, the SFO has said publicly that in its view not having Adequate Procedures infects the other offences by way of corporations being blind to the risks and therefore having the necessary criminal intent.
Whether or not this argument works will be heavily dependant on the facts.
Potentially the easier approach would be to go under Section 7 as you say.
The UK corporation would be guilty of under Section 7 IF the Russian subsidiary was providing services for and on behalf of the UK Parent and the bribe was paid to obtain or retain business and/or business advantage for the UK Parent, subject to the defence of having Adequate Procedures to prevent bribery.