Adequate Procedures, Facilitation payments, Long arm jurisdiction - are you subject to the law? - Written by on Wednesday, March 2, 2011 12:39 - 0 Comments

Richard Alderman: Facilitation payments: US OK? UK NO-KAY?

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Yesterday in the first of our series of Q & A with Richard Alderman we flagged the risk to overseas corporates because of the top priority placed on investigating and prosecuting them for violations of the Bribery Act by the SFO.

We, like you, have heard the stories circulating that the final guidance will include some comfort when it comes to corporate hospitality and facilitation payments.  This is broadly consistent with what the SFO have been saying for months on these subjects when listened to carefully.

Whatever the final guidance says we do not anticipate that carte blanche will be given on the making of facilitation payments (we do expect the ‘rules’ about corporate hospitality to be fleshed out and some comfort to be given when it comes to facilitation payments).

Against this backdrop today we publish the second in our series of questions with Richard Alderman on the subject of facilitation payments., Question:

What would the SFO’s position be in relation to an overseas company which makes facilitation payments in compliance with the FCPA exemption and as a result is not prosecuted by the DOJ.  Would the SFO prosecute? and if so in what circumstances?

Richard Alderman, Answer:

I have made it clear that facilitation payments are already bribes under the current UK law and that this position will remain under the Bribery Act.

Guidance on the issues here will be provided in the Ministry of Justice guidance together with the Directors’ guidance to be issued by the Director of the SFO and the Director of Public Prosecutions.

I have also made it clear that US corporations that are FCPA compliant need to look at their anti-bribery programs because there is no exemption for facilitation payments under our law.  The SFO will reserve the right to prosecute in appropriate circumstances, particularly where corporates use facilitation payments as a way of disadvantaging ethical corporates.

The SFO has made it clear that the aspiration has to be zero tolerance for these payments although it will be sympathetic to the difficulties that companies have in getting to that standard. comment

It is clear that FCPA compliant anti-corruption procedures will need to be updated to deal with the Bribery Act.  We do not expect a facilitation payment exemption along the lines of the FCPA exemption.

We would advise corporates to pay special attention to this sentence:  “The SFO will reserve the right to prosecute in appropriate circumstances, particularly where corporates use facilitation payments as a way of disadvantaging ethical corporates.”

It is clear that, like the US, the SFO intends to use the Bribery Act as a weapon to prosecute overseas companies who undercut UK businesses using bribery and corruption.

Put another way, any overseas corporate which:

1)  has some UK nexus (which the SFO will argue is sufficient to cross the threshold of carrying on business in the UK); AND

2) competes with UK PLC in an overseas jurisdiction using facilitation payments to win business against ethical UK businesses;

runs the risk the SFO might come knocking on its door early in the morning to give its UK premises a ‘spin’ and aggressively pursue an investigation and prosecution.

Provided that the SFO can prove a UK nexus which gets over the carrying on business threshold, such corporates should keep in mind that  compliance with the FCPA exemption, namely keeping proper books and records of such payments (ie bribes), will be all the evidence the SFO needs to obtain a conviction.

Image © Crown Copyright 2011

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