Member Article

Background

There has been a debate over many years in the UK as to whether or not its bribery legislation was adequate.  As long ago as 1998, the Law Commission highlighted major defects in the UK bribery law.  Since then there have been a number of draft Bills and Consultation papers.  Although the United Kingdom was one of the earliest signatories to the OECD Anti-Bribery Convention, it was subsequently heavily criticised as having domestic laws which did not appear to coincide with the Convention’s requirements.  This came to a head following the investigation into alleged payments by BAE Systems regarding aircraft sales to Saudi Arabia.  An investigation was stopped by the Blair Government on the basis that it was “not in the public interest”.  The Government was condemned from around the world and in particular from the United States.  The momentum for change accelerated.

The New Act

The new Act introduces four offences:

1.                   An offence covering the offer, promise or giving of a bribe (active bribery)

2.                   An offence covering the requesting, agreeing to receive or acceptance of a bribe (passive bribery)

3.                   A separate offence of bribing a foreign public official (with the intention of influencing or intending to obtain/retain business)

4.                   A corporate offence of failing to prevent bribery

Personal Liability

Penalties

Penalties for a corporation are an unlimited fine and for an individual they are up to 10 years imprisonment.  Companies convicted under the legislation can be permanently barred from tendering for public sector contracts under the Public Contracts Regulations 2006 throughout the E.U.  In addition to any criminal penalty, a company can also be fined by a Sectoral Regulator (e.g. Financial Services Authority).  Individuals convicted of an offence can be disqualified from being a statutory director in the UK for up to 15 years.

Jurisdiction

If an offence or any constituent part is committed in the U.K. then the U.K. will have jurisdiction. The offences of active and passive bribery and the bribery of a foreign public official can be committed even though all the acts or omissions in question took place abroad.  They will constitute an offence in the UK if the person performing them is a British National or ordinary resident in the United Kingdom or a body incorporated in the United Kingdom.

The Corporate Offence

The corporate offence is committed where an “associated person” e.g. employee, agent, joint venture partner or other business associate, enacts bribery with the intention of obtaining or retaining business or advantage in the conduct of business for the corporate entity.  Such action does not need to be with the approval or even the knowledge of the corporate.  It is a strict liability offence. 

The Ministry of Justice has published guidance which was a legal requirement under the Act.  It is clear from the document that this is goal setting rather than prescriptive.

·                     Top Level Commitment

·                     Risk Assessment

·                     Proportionate Procedures and Policies that are Clear Practical and Accessible

·                     Due Diligence

·                     Effective Implementation

·                     Monitoring and Review

What will Adequate Procedures look like?

It is clear from that one size does not fit all and each organisation should be looking to formulate its own unique set of documents which are relevant and practical for its own particular business.

The following are the minimum that will be required:-

·                     A top level statement and/or code of conduct from the board of directors on bribery setting out general principles and expected standards of behaviour.  It is expected that this statement will be publicly available on the organisation’s website and communicated to business partners.

·                     A risk assessment process that assesses potential external and internal risk of bribery and assists in identifying and prioritising control measures to be implemented

·                     A wide ranging policy for the workforce which clearly prohibits all forms of bribery includes an explanation of what amounts to bribery and sets out the consequences of the breach of the policy.

·                     Practical guidance for staff and others on discreet areas relevant to the organisation, e.g. gift giving, corporate hospitality, expenses, facilitation payments.

·                     A procedure for staff to be able to report bribery and other suspicious activity.

·                     A procedure for managers to deal with incidents of bribery in a prompt consistent and appropriate manner.

·                     Procedures to ensure that financial systems and controls prevent payments from being made that are not properly accounted for and may amount to a bribe.

·                     It will be expected that the organisation will appoint and train a compliance officer to oversee the systems and procedures in place.

·                     Due diligence will see employees of business partners encouraged to ensure that they all comply with the anti-bribery policies and procedures.

Corporate hospitality

This is regarded as a legitimate part of doing business, provided it remains within appropriate limits.  The Government has stated that most routine and inexpensive hospitality would be “unlikely to lead to reasonable expectation of improper conduct”.  It is likely therefore that only lavish corporate hospitality will fall foul of the legislation.

Facilitation Payments

Appointment of Agents and Joint Venture Partners

Conclusion

The new UK bribery legislation is amongst the toughest in the world.  Organisations can be caught by the Act simply because they carry out business in the UK.  They can be responsible for acts of bribery committed on their behalf by agents without their knowledge. The guidance published by the Government relating to “adequate procedures” is generic.  What will not be available is an advice service, such as that provided by the Department of Justice in the United States, in advance of embarking upon business transactions.

It should be remembered that all the prosecution will need to prove, is that procedures to prevent active bribery were not in place, not that bribery did occur.  It will not have to have prosecuted to conviction or at all.  The burden will then shift to the organisation to prove that it had in place adequate procedures designed to prevent employees or others associated with it from indulging in such conduct. However an investigation is only likely to be triggered by attempted bribery, a competitor complaint or whistleblowing by an employee to the authorities

Action Plan

It will be necessary to conduct a risk assessment and in the light of that review existing policies in this area and/or write new ones. Once this has been undertaken, it will be necessary to adequately train relevant employees and possibly “associated persons” in the law, policies, as well as the ethics and business practices expected of them.  Failure to train and to be able to prove that such training has been undertaken, could result in an attempt to prove that adequate procedures are in place, failing at the first hurdle.

An online e-learning course has been developed by Shoosmiths.  It is followed by an evaluation programme whereby those who have undertaken the course answer multi-choice questions and are required to achieve a pass mark.  This would provide evidence that policies and procedures have been fully understood.

If you have any questions concerning this article please contact either

Ron Reid                                                Andrew Pickin
[email protected]       or          [email protected]  
00441604543317                                     00441159065032