News & what's on - Written by Barry & Richard on Monday, June 25, 2012 13:47 - 2 Comments
Victim of bribery? You have rights too. Damages claims, void(able?) contracts & more: the civil consequences of bribery
In the UK civil actions can be directed at both the briber and the receiver of bribes by the principal of a bribed agent, who has entered into a contract as a result of the bribe being paid to that agent.
It is important not to lose sight of this. There are three key advantages to civil actions:
- They could mitigate potential losses if an organisation discovers corruption and self reports to the SFO, as organisations are being encouraged to do.
- Money recovered could also offset the cost of any investigation necessary to be in a position to self report.
- They send a powerful message to those involved in corrupt behaviour that it will not be tolerated.
We are criminal law specialists but we often work with our civil law colleagues. In this post our colleague and friend of thebriberyact.com Will Christopher gives the heads up on civil remedies.
More stringent anti-corruption policies being implemented and more internal investigations into corruption arising from the Bribery Act are likely to lead to the discovery of more bribery and corruption.
What many people and companies do not realise is that civil actions can be directed at both the briber and the receiver of bribes by the principal of a bribed agent, who has entered into a contract as a result of the bribe being paid to that agent. This means that the principal, who is the victim of the bribe, can recover compensation. It is also possible for the principal of the briber who does not know of their agent’s corrupt activities (and also arguably a victim) to recover the bribe and damages.
What is a bribe?
The criminal and civil definitions of a bribe are different.
A bribe in civil law is where a person makes or agrees to make a payment to an agent, or other fiduciary, without the knowledge and consent of the principal. It is necessary to show the briber knew he was dealing with an agent, and that the principal was being deprived of the agent’s disinterested advice. It is of crucial importance that the bribe was kept a secret from the principal. Partial disclosure will be enough to mean the commission is not secret and is therefore not a bribe within this definition.
Another important distinction is that knowledge of the briber that he is dealing with an agent is sufficient – it is not necessary to show that he was dishonest in giving the bribe.
Once the criteria above have been established a number of important consequences follow:
- the motive of the briber is irrelevant;
- it is immaterial whether either the briber or the bribed agent thought they were doing anything wrong; and
- there is an irrebuttable presumption that the agent was influenced.
Once a bribe is established, both the principal of the bribed agent and potentially the principal of the briber have remedies in the civil courts:
- rescission of the contract;
- refusing to perform on the basis it is an illegal contract, alternatively on the basis it was void for want of authority;
- a claim against the bribed agent, in damages for fraud; and
- a claim against the briber for the amount of the bribe.
Additionally, by the innocent principal of the briber:
- a claim against the agent who made the bribe as a proprietary claim;
- a claim against the receiver of the bribe, again as a proprietary claim.
Claims by the principal of the bribed agent
If the decision is to perform the contract rather than rescind, damages will still be available against both the briber and the bribed agent for at least the amount of the bribe, which is assumed to be the value of the claim. Damages in fraud for more than the bribe will also be available, but anything over and above the amount of the bribe would have to be proven and be a direct consequence of the bribe, although not necessarily foreseeable. This could include the costs of an investigation, necessary in order to self report, or a claim for damage to reputation.
Void or voidable?
It may be in the principal’s interest instead of rescinding the contract, to allege that it is void and likely that the principal of a bribed agent will be able to claim that the transaction is void rather than merely voidable. It is not difficult to imagine situations where this could be hugely advantageous to the principal.
An election between the various claims which the principal can bring against the bribed agent must be made, but it is not necessary to do so until immediately before entering judgment.
Claims by the innocent principal of the briber
A principal whose agent uses the principal’s money to pay a bribe without the principal’s knowledge or consent can recover this from the agent. This could either be where an organisation has paid a commission to an agent, who has utilised that money to pay a bribe, or where a company director pays bribes on behalf of the company. In this case it will be the company with the proprietary claim against the director, or against the recipient of the bribe. It will also have a claim against anyone who has dishonestly assisted in the payment of it.
The Bribery Act again comes into play here. It will no doubt strengthen the case against the agent that the bribe was concealed, by showing that the commercial organisation has adequate procedures in place to prevent bribery, so as to provide it with a defence in criminal proceedings.