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What is the Bribery Act?

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What is the Bribery Act?

The law under the Bribery Act 2010 the UK’s tough new anti-bribery and corruption law is straightforward and summarised below.

The Bribery Act and the FCPA

While it, like its US equivalent the Foreign Corrupt Practices Act (FCPA), has been criticised for being uncertain and overly broad it is noteworthy that in the US juries have not found applying the FCPA difficult passing guilty verdict after guilty verdict against individuals prosecuted for bribery.

It is likely that English juries will have little difficulty with the new law.

In the US corporates typically do not defend prosecutions brought under the FCPA as a result of the unlikely prospect of a successful defence (there have not been any successful corporate defences run) and the reputational and other collateral damage suffered along the way.

The fate of Arthur Andersen (which ultimately was acquitted but ceased to trade) in the wake of the Enron scandal is perceived to be a dangerous precedent.

While it remains to be seen if the same approach will be taken in the UK – so far all indications are that it will.

As a result the Bribery Act is a powerful piece of legislation.

The offences

The law can be summarised into four key crimes.

  1. Bribing
  2. Receiving a bribe
  3. Bribing a foreign public official; and
  4. Failing to prevent bribery

are all offences.

The new offence of failure to prevent bribery has garnered most headlines. Under this offence organisations are criminally responsible for bribes on their behalf by ‘Associated Persons’ whether they know about them or not. There is a defence, that the organisation had in place ‘Adequate Procedures’ to prevent bribery.

Directors and officers of a company may be guilty of offences if they are implicated either actively or passively.

Am I or my business caught?

In order to be caught all that is required is that your business carries on business or part of its business in the U.K.

Any business with UK connections will potentially be caught by the new laws.

The UK government has indicated that it expects that this requirement will only be met if a business has a ‘demonstrable business presence’ in the UK.

The Ministry of Justice has highlighted, for example, that the listing of an overseas company on the London Stock Exchange or alternatively simply having a subsidiary in the UK would not, in themselves, meet the threshold.

We advise businesses to exercise caution when seeking to fall within these carve outs as there may be other connections which work to create a ‘demonstrable business presence’.  Businesses are advised to take a close look at the legal and operational set up of their group operations with a view to ensuring that risk is minimised if possible as the meaning of carrying on business is likely to be interpreted broadly by the U.K. courts.

Companies will potentially be caught by the new laws in a variety of ways including, by having a branch, subsidiaries and the group relationships that go with them, sales representatives, agents, distributorships or even bank accounts and customers in the U.K.

What if the bribery is not conducted by my business but by someone else?

On top of your business own activities, whether or not you are aware of it, you will be criminally responsible for bribery committed by business partners who provide services to your business worldwide if your business was intended to benefit or benefits, directly or indirectly.

The UK Serious Fraud Office (SFO) have identified the new long arm jurisdiction and the new offence of failing to prevent bribery as important elements of the new law.

Is bribery outside the U.K. caught?

Yes.

If your business is subject to the law then bribery involving your business worldwide is caught.

What is a bribe?

In addition to obvious cases of bribery facilitation or “grease” payments (the payment of small sums of money to ensure someone performs their duty, either more promptly or at all) are illegal.

The Serious Fraud Office (SFO) have said that they cannot condone such payments but that the question of how they police these will be a question of their seriousness, amount and regularity.  The SFO has also said that while they do not expect facilitation payments to be eradicated overnight they expect all businesses to work toward their eradication and to adopt a zero tolerance approach to them. The SFO have told us that if they receive satisfactory answers to these six questions then organisations will be shielded from successful prosecution.

Importantly bribery is not just about brown envelopes enclosing cash.

Corporate hospitality can be bribery, for example if it is disproportionate or lavish.

The SFO have said that they will be looking at examples of lavish hospitality. Corporate hospitality will need to be for an obvious and legitimate commercial purpose. What will be lavish will be a question of degree.  What might be OK for one customer is likely to be different for another.

It will be critical for businesses to maintain proper books and records and ensure total transparency of payments made, corporate hospitality given and to whom.

What are the penalties?

If you get it wrong you risk prison. Your business risks unlimited fines, blacklisting from EU contracts and the forfeiture of the value of illegal deals under related Proceeds of Crime and money laundering laws.

Though the SFO are keen to encourage businesses to Self Report and potentially avoid the most draconian consequences.  This decision should only be made after weighing up the position very carefully and taking specific legal advice.

There is a defence for businesses

Importantly there will be a statutory defence for businesses that have ‘Adequate Procedures’ to prevent bribery.

The government has published guidance around this. The guidance [PDF] was published by the Ministry of Justice in March 2011.  The guidance is principles based rather than prescriptive. The six principles enshrined in the guidance are:

1.Proportionate procedures

2.Top level commitment

3.Risk assessment

4.Due diligence

5.Communication (including training)

6.Monitoring and review

Companies who put in place ‘Adequate Procedures’ to prevent bribery will have an absolute defence to liability under the new law. Similarly, broadly speaking, because of the way the statute works senior officers of organisations that have put in place ‘Adequate Procedures’ to prevent bribery will be shielded from successful prosecution (unless they are themselves implicated in the corrupt behaviour).

If you would like help with putting together your ‘Adequate Procedures’ or would like someone to look at the procedures you have put or are planning to put in place then let us know.  We can tell you if what you are proposing to put in place meets the standard.

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